(12 years, 10 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
22:01 - The House divided: - Ayes: 9 / Noes: 382 - Question accordingly negatived.
The Exchequer Secretary to the Treasury (Mr David Gauke)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Mr Lindsay Hoyle)
With this it will be convenient to discuss the following: new clause 8 —Funding formula for Scottish Government (No. 2)—
‘(1) Within six months of the day on which this Act is passed, the Chancellor of the Exchequer shall lay before the House a report on the formula for allocating funds from the Consolidated Fund to the Scottish Government, and on alternative ways of calculating the sums to be paid.
(2) Within six weeks of laying the report referred to in subsection (1) above, the Chancellor of the Exchequer shall lay before the House proposals for a new funding formula which would ensure that the funds allocated to the Scottish Government are no more than 5 per cent. below or above the equivalent figure for each of the other nations of the UK.’.
New clause 9—Tax on profits of companies—
‘In Part 4A of the 1998 Act (as inserted by section 24), after Chapter 4 (inserted by section 30) insert—
Chapter 5
Tax on Profits of Companies
80L Tax on profits of companies
The Secretary of State shall, within one month of the coming into force of section 80B of this Act, lay in accordance with Type A procedure as set out in Schedule 7 to this Act a draft Order in Council which specifies as an additional devolved tax a tax charged on the profits of companies.”’.
New clause 19—Spirits, wine, beer and cider duties—
‘(1) The 1998 Act is amended as follows.
(2) In Part 2 of Schedule 5 to the Act, in section A1 (specific reservations: fiscal, economic and monetary policy), after the heading “Exceptions”, insert—
“Spirits duties, wine duties and beer and cider duties”.’.
Amendment 25, in clause 24, page 16, line 35, at end insert—
‘(c) Chapter 5 provides for an Order in Council to specify, as an additional devolved tax, a tax charged on the profits of companies.’.
Amendment 24, in clause 26, page 20, line 24, at end insert—
‘(3) T is deemed to be in Scotland at the end of a day when T commences a journey in Scotland before midnight and arrives at a destination in England after midnight, irrespective of the time at which the border between Scotland and England is crossed.’.
Government amendments 31 and 15.
Amendment 26, in clause 32, page 25, line 10, leave out
‘with the approval of the Treasury, borrow by way of loan’
and insert ‘borrow’.
Amendment 27, page 25, line 15, at end insert—
‘(1C) In borrowing any sums under subsection (1A), the Scottish Ministers must have regard to any code of practice agreed by them and the Treasury.
(1D) A code of practice agreed under subsection (1C) may include provision as to—
(a) how the Scottish Ministers are to determine and keep under review how much they can afford to borrow,
(b) the terms and conditions on which sums may be borrowed,
(c) limits on the aggregate at any time outstanding in respect of the principal of sums borrowed.’.
Government amendment 32.
Amendment 28, page 25, line 26, leave out from beginning to end of line 33.
Government amendment 33.
Amendment 29, page 25, line 43, leave out subsection (10).
Government amendments 34 and 35.
Amendment 23, in clause 39, page 28, line 35, leave out from beginning to end of line 2 on page 29 and insert—
‘(2A) Subject also to the provision made in sections 26(1) to (6), 27, 28, 29, 30 and 31 as to how those sections are to have effect, Part 3 shall come into force at the end of the period of two months after the new funding formula referred to in subsection (2) of section [Funding formula for Scottish Government (No. 2)] has been approved by resolution of the House of Commons.’.
Amendment 37, page 28, line 35, at end insert—
‘(c) section [Spirits, wine and beer and cider duties]’.
Amendment 18, page 28, line 40, at end insert—
‘(3A) Notwithstanding any provisions in subsection 3(a), (b) or (c), sections 26(1) to (6) and 27, sections 28 and 29, and sections 30 and 31 can not be commenced without the consent of the Scottish Parliament.’.
Amendment 2, page 29, line 2, at end insert
‘except new subsections (1A) and (1B) of section 66 of the 1998 Act, inserted by section 32(3), and subsections (9) and (10), which shall come into force on 1 April 2012’.
Mr Gauke
It gives me great pleasure to return to the House to discuss the Scotland Bill after the Committee debate in March.
The first group of amendments on today’s selection list is fairly extensive and addresses several different aspects of the Bill’s finance package. I will set out why we have tabled Government amendments and why we will not accept the non-Government amendments.
In Committee, we debated the definition of a Scottish taxpayer for the Scottish rate of income tax. I said that the Government would table a new clause to apply the same definition to the Scottish variable rate, in response to one of the recommendations of the Scottish Parliament’s Scotland Bill Committee. The reworked definition of a Scottish taxpayer for the new Scottish rate of income tax is a significant simplification. I appreciate that it is unlikely that the Scottish variable rate will ever be invoked. Nevertheless, without the amendment, there would be two separate definitions of a Scottish taxpayer in place at the same time. There is potential for practical difficulties for taxpayers, employers and their professional representatives, who might need to familiarise themselves with one definition for the years up to 2015-16, only to have to switch to a different definition for subsequent years. That is entirely unnecessary.
Applying the definition of a Scottish taxpayer that has been developed for the Scottish rate of income tax for the purposes of the Scottish variable rate will help smooth any transitional issues, and will also make it easier for people to understand whether they are classed as a Scottish taxpayer. The Scottish Parliament’s Scotland Bill Committee rightly recommended the change, with which the UK Government very much agree, and I commend the new clause to hon. Members.
On a previous occasion, my hon. Friend the Member for Milton Keynes South (Iain Stewart) raised a particular query. He has tabled amendment 24, about which he intends to speak later. I will respond to the issues that he raises after he has had an opportunity to set out his thoughts on that.
Government amendment 31 would make a small, technical change, to which I hope the House can agree. Section 989 of the Income Tax Act 2007 contains several definitions, which apply for the purposes of income tax legislation. It includes definitions of the basic, higher and additional rate of income tax. They refer to the rate of income tax set by the UK Parliament in the year in question. Government amendment 31 would extend those definitions to include the rates applicable to a Scottish taxpayer. As I said, it is a minor drafting amendment, and I do not anticipate its proving too controversial.
The purpose of Government amendment 15 is to correct a technical fault with the Bill so that it is consistent with the Government’s policy intentions as set out in the Command Paper, which states that the Scottish Government will be able to borrow to manage the difference between forecast and outturn tax receipts. However, as I explained in our Committee debate on 14 March, the Bill as it currently stands enables the Scottish Government to borrow to manage this difference only for fully devolved taxes, and not the Scottish rate of income tax. That is a technical fault, which the amendment corrects. I hope that it will be accepted.
Let me deal with Government amendments 32 to 35. The purpose of Government amendment 32 is to introduce a power, which will enable the Government to amend in future the way in which Scottish Ministers can borrow, including by way of bond sales, without the need for further primary legislation. The Bill gives Scottish Ministers a new power to borrow, by way of loan, from 2015-16 up to £2.7 billion of total debt, £2.2. billion of which can be used to fund capital expenditure.
The UK Parliament has an interest in ensuring that Scottish Ministers can borrow efficiently and sustainably because, although interest paid on any loans will be funded from the Scottish budget, it will be included in the UK fiscal aggregates. The Bill therefore gives Scottish Ministers the power to borrow in the most efficient and sustainable way—from the national loans fund, as recommended by the Calman commission. In addition, should Scottish Ministers so choose, the Bill gives them the power to borrow by way of commercial loan where that represents value for money.
Reports on the Scotland Bill by the Scottish Affairs Committee and the Scottish Parliament have recommended that Scottish Ministers should be granted additional borrowing powers—specifically, the power to issue bonds. The First Minister made the same points in his discussion with my right hon. Friends the Chancellor of the Exchequer and the Secretary of State for Scotland. The reports and discussions have highlighted the discrepancy between the powers of Scottish Ministers and local authorities, which already have the power to issue bonds.
So far, the main evidence that has been provided to the Government in support of Scottish Ministers issuing bonds is “because other bodies can do it”. However, with the exception of Transport for London, the vast majority of local authorities have not exercised those powers in recent history, not least because local authorities judge that they have access to more efficient and sustainable forms of borrowing.
The Government continue to believe that the case against bond issuance is clear cut, particularly in the medium term, given the uncertain outlook and challenging fiscal mandate. All the evidence suggests that further bond issuance would have a negative impact on the UK’s fiscal position.
In the context of the highest deficit since world war two, the Government would consider allowing Scottish Ministers to issue bonds in future only when that does not undermine the overall fiscal position, or have a negative impact on total UK borrowing. If a case is made that Scottish Ministers’ borrowing powers could be extended without undermining the overall UK fiscal position or increasing UK borrowing, the amendment that I am tabling today would allow changes to the borrowing powers of Scottish Ministers to take effect swiftly, by way of an order.
The Government have committed to conducting a review of the costs and benefits of bond issuance over other forms of borrowing to help inform any decision. The amendment would have the effect of, first and foremost, protecting the UK’s fiscal position by continuing to allow Scottish Ministers to access the most efficient and sustainable source of borrowing.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
After the Bill has been passed, the Welsh Government will be the only political entity in the British state unable to borrow. Will the Exchequer Secretary address that matter quickly, rather than awaiting some prolonged Calman process, which the Government currently envisage?
Mr Deputy Speaker
Order. I am not sure that that is relevant to the debate.
Mr Gauke
I want to make it clear that Government amendment 32 would not grant the power of issuing bonds to the Scottish Government. However, it would enable us to move more quickly should that decision be made in future The Welsh Assembly Government are not alone in their status, although the amendment would enable us to move more quickly should we decide to proceed in that direction.
Amendment 2, which was tabled by Her Majesty’s Opposition, would bring forward the introduction of the capital borrowing requirement set out in clause 32 from April 2015 to April 2012. Amendment 26 would remove the role of the Treasury in approving capital borrowing and the restriction that such borrowing must be by way of a loan. Amendment 27 would introduce a new statutory code of practice, to be agreed between the Treasury and Scottish Ministers, to govern capital borrowing permitted by section 66(1) of the Scotland Act 1998. Amendment 28 would remove the £2.2 billion aggregate limit on capital borrowing by Scottish Ministers. Amendment 29 is consequential on amendment 28. As hon. Members wish to remove the borrowing limits from the Bill and the ability to revise those with the approval of the House, clause 32(10) would no longer be necessary, because there would be no such secondary legislation.
Andrea Leadsom (South Northamptonshire) (Con)
If that debt must be consolidated with the UK’s national debt, it should surely be considered as quasi-UK Government debt. Does the Minister therefore agree that if the Scottish National party goes ahead with its vote on independence, it will need to consider very carefully the increased cost of borrowing that would ensue?
Stewart Hosie (Dundee East) (SNP)
For the sake of clarity, will the Minister confirm that that £2.2 billion is a cumulative sum, and that the annual amount is £230 million?
Mr Gauke
Yes, that is the case, but we must consider the consequences of that borrowing for the UK’s debt position. That is the level that we believe is right.
As I set out in Committee, the £2.2 billion represents a floor, not a ceiling. The Bill provides for the limit to be increased to more than £2.2 billion with the approval of the House, but not for it to be reduced to less than £2.2 billion.
David Mowat (Warrington South) (Con)
A few moments ago, the Minister mentioned the pre-payment amount for the Forth road bridge. Did the Treasury consider a toll on that bridge, in much the same way as a toll was considered for the Mersey Gateway bridge next to my constituency? If not, is that not asymmetric governance?
Mr Gauke
The decision on whether to put a toll on the Forth road bridge will be one for the Scottish Government. The Treasury has therefore not considered that proposal. Perhaps my hon. Friend should ask Scottish National party Members what consideration was given to such a toll. I suspect that the answer will be, “Not a lot.” The expression on the face of the hon. Member for Dundee East (Stewart Hosie) is probably confirmation that no consideration was given to my hon. Friend’s suggestion. Asymmetry is inherent in such devolved matters.
The UK Parliament has an interest in ensuring that Scottish Ministers can borrow efficiently and sustainably, because although interest paid on any loans will be funded from within the Scottish budget, it will be included in the UK fiscal aggregates.
Andrea Leadsom
For the sake of clarity, the Minister tells my hon. Friend the Member for Warrington South (David Mowat) that the decision on whether there will be a toll on the Forth road bridge is a devolved matter, and yet also says that any Scottish Government borrowing would be included in the British national debt. How can that toll be a devolved matter? The UK is involved in keeping the cost of funds to the Scottish Government down so that they can afford to fund a bridge that people in England are unable to afford without charging a toll.
Mr Gauke
We must remember that any debt service will be financed by the Scottish taxpayer—that is the context.
We should move on. As I said, any loans will be funded from within the Scottish Budget and included in the UK fiscal aggregates. The Bill therefore continues to give Scottish Ministers the power to borrow in the most efficient and sustainable way—from the national loans funds, as recommended by the Calman commission. In addition, should Scottish Ministers choose to do so, the Bill gives them the power to borrow by way of a commercial loan when that represents value for money.
The Government continue to believe that Scottish Ministers should be able to borrow only by way of a loan, but because overall macro-economic policy will continue to be a reserved matter, and because Scottish borrowing will impact on the UK fiscal position, it is right that this House agrees the limits and conditions of borrowing. I therefore ask Opposition Members not to press amendment 2 and amendments 26 to 29 to a Division.
Stewart Hosie
The Minister suggests that various Opposition Members from various parties do not press their amendments. Is it not normally in order to hear the arguments for them before jumping to such a strange and presumptuous conclusion?
Mr Gauke
I do not think it an unprecedented statement. I am sure that the hon. Gentleman and I have served on many a Committee where that has been suggested. I wait to hear how persuasive the case is, but I suspect that I will not be persuaded, and that, to some extent, the amendments may be probing. We await the arguments, and I look forward to them.
New clause 8, tabled by the right hon. Member for Birkenhead (Mr Field), has two purposes. First, it seeks to legislate for the Chancellor, within six months of the day on which the Bill is passed, to
“lay before the House a report on the formula for allocating funds from the Consolidated Fund to the Scottish Government, and the alternative ways of calculating the sums to be paid.”
Secondly, it would require that within
“six weeks of laying that report…the Chancellor…lay before the House proposals for a new…formula which would ensure that the funds allocated to the Scottish Government are no more than 5 per cent. below or above the equivalent figure for each of the other nations of the UK.”
As hon. Members know, the formula for allocating funds from the Consolidated Fund to the Scottish Government is known as the Barnett formula, and as hon. Members will recall, the Bill seeks to increase the accountability of the Scottish Parliament to its people by devolving fiscal powers from Whitehall to Holyrood, and deducting a corresponding amount from Scotland’s block grant.
The Bill does not change the level of funding for Scotland. Future decisions taken by Scottish Ministers will affect the overall funding for Scotland’s public services, because Scottish Ministers will decide whether to increase or decrease devolved taxes relative to the UK. Reforming the Barnett formula is an entirely separate issue from those we are considering in the Bill, and one that the Calman commission did not make any recommendations on. The current formula is an administrative procedure and does not appear in legislation. It is not specific to Scotland, but is a mechanism for allocating funding across all four countries of the UK, so it would not be appropriate to legislate to alter it for Scotland in isolation. The Bill would not be an appropriate place for that
Kate Hoey (Vauxhall) (Lab)
I understand why the Minister does not think that discussion of the Barnett formula is appropriate for this evening’s debate, but my constituents feel strongly about the fact that Scotland gets so much more than they do generally. What mechanism could we use to have the Barnett formula looked at?
Mr Gauke
Partly following the strictures of the hon. Member for Dundee East, I would say that I am loth, at this stage of the debate, to make strong recommendations to the House about which new clauses should be accepted and which should be withdrawn and so on. I simply want to provide the context and argue why the Barnett formula should not be addressed in the Bill. I appreciate that there is a wide range of views on this issue, and that there are strong feelings throughout the UK. I dare say that a number of those views will be expressed this evening—indeed, this debate provides an opportunity for it. At this stage, however, I just want to draw the House’s attention to some of the difficulties with trying to address the matter in the Bill. I shall turn to the substance of the debate in a moment, but that is what I am seeking to do at the moment.
Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)
I am sure that the hon. Gentleman will want to confirm that if my hon. Friend the Member for Vauxhall (Kate Hoey) got the reorganisation of the formula that she seems to want, the parts of the UK that would lose the most—the ones that are most overfunded by her definition—would be London, where she is an MP, and Northern Ireland, which I know she has a close interest in. If we are going to debate the matter, let us debate the facts rather than the myths.
Mr Gauke
Of course, and there are regional variations within all the four nations. The point is that there are strong views on this issue. I am making the case for why it is difficult to address it in the Bill. Reforming the Barnett formula is an entirely separate issue from those we are considering in the Bill, and from the matters that the Calman commission looked at. As I said, the formula does not appear in any legislation as such, and there would be disadvantages in trying to come up with a legislative answer. However, I appreciate that this is an opportunity to debate the matter.
Mr Gauke
The Government understand the concerns expressed about the devolved funding arrangements, but we have also made it clear that the priority now must be to reduce the deficit, and any change to the current system and Barnett formula must await the stabilisation of the public finances. The Bill does not rule out or rule in reform of the formula in the future, but we do not believe that now is the right time. A change in the Barnett formula is not the purpose of the Bill, and it would not be appropriate to legislate for it here. As I said, I look forward to this debate, as right hon. and hon. Members will clearly take the opportunity presented by the Bill to express their views on this particular point.
David Mowat
I understand that the Exchequer Secretary does not want to spend too long now talking about the Barnett formula, so I will be quick. He said that we are too busy sorting out the deficit to address the Barnett formula, which I think is a fair and reasonable point. That is why many of us think that we should put in place a process to ensure that by 2015, when, as I understand it, the structural deficit will be eliminated, we can put in place a fair and transparent policy.
Mr Gauke
I understand the views expressed by my hon. Friend. There are a number of changes and developments in this area, not least the powers in the Bill. I agree with him that this will continue to be a live issue, but at this stage I am not in a position to make any promises to him. However, I am sure that this issue will continue to be debated, and strong views will be expressed. I can understand the points he makes, but this is not the time for a legislative solution.
Amendment 23, tabled by the right hon. Member for Birkenhead, is consequential on new clause 8 and would delay the financial provisions in part 3 of the Bill coming into force until two months after the House passes a resolution approving the Chancellor’s proposals for a new funding formula. It would then automatically bring part 3 into force two months after such a resolution. I set out why I did not consider it appropriate to debate at this time a new funding formula for Scotland when I discussed new clause 8. The Government are clear that this is a UK-wide administrative procedure and therefore has no place in the Bill. The Government’s priority is to stabilise the public finances and reduce the deficit before making any changes to the Barnett formula, as I have said.
Even were we able to accept new clause 8, the manner of commencement set out would be problematic because it would create technical problems by potentially bringing in consequential amendments relating to the Scottish variable rate before that itself had been repealed. I am sure that that is not what the right hon. Gentleman intends. The new clause would have other consequences, however. It would mean that clause 32, on borrowing provisions, could not be brought into force until an agreement had been reached on a new funding formula for Scotland. As I have set out, the changes introduced by the Bill are not contingent on a new funding formula being agreed to replace the Barnett formula, so I do not see the need to wait to introduce the borrowing clauses until such a new formula has been agreed.
Amendments 25 and 37, and new clauses 9 and 19, relate to corporation tax and alcohol duties. These amendments propose to increase the power in the Bill to provide for an Order in Council specifying corporation tax and alcohol duties as devolved duties. The Scottish Government have publicly requested that six additional powers be included in the Bill, including powers over corporation tax and alcohol duties. I understand that the First Minister has met colleagues in the Government to highlight those requests. In those meetings, the First Minister agreed to provide detailed written analysis of the benefits to both Scotland and the UK of devolving those powers. No such papers have yet been provided. We await them with interest, because we have yet to hear the case made in detail.
As hon. Members will recall, the Government are committed to implementing the recommendations of the Calman commission, which considered the merits of devolution for a wide range of taxes and decided that neither corporation tax nor alcohol duties were suitable candidates for devolution. Calman concluded that the potential administrative impact of devolving either tax would be significant. The creation of compliance costs for businesses operating on either side of the border, as well as the increased collection costs for the Government, would be undesirable, especially in the present economic climate. The risks of tax avoidance and arbitrage could also be increased, with additional costs to the Government and the UK Exchequer. These arguments apply to both corporation tax and alcohol duties.
Calman also noted that if comparable levels of public services were to be maintained, the scope for substantive reductions in the rate of corporation tax in Scotland would be limited, unless the Scottish Government were willing significantly to increase revenues from other sources, such as income tax. The figures involved could be significant. For instance, if we take the Scottish Government’s estimate of the corporation tax base, published in their “Government Expenditure and Revenue Scotland” report, and apply the methodologies developed for the Government’s paper on rebalancing the Northern Ireland economy, the cost of reducing Scottish corporation tax to 12.5%—the current rate in the Republic of Ireland—would be just over £2 billion. However, the Scottish economy is very different, not least in the presence of many large multinationals, particularly from the financial sector, whose current activity is unlikely to be adequately covered in the gross value added estimate, but whose profits are additionally likely to be attributable to Scotland with regard to corporation tax.
Provisional HMRC analysis has indicated that losing payments from large Scottish-domiciled groups could add £600 million to the direct costs. Such tax cuts would have to be funded, either by significantly reduced levels of public spending in Scotland or by tax rises in other areas. It is worth noting that these are initial estimates, and are likely significantly to underestimate the scope for profit shifting to Scotland. The model uses similar assumptions to those applied to the costing for Northern Ireland. However, given the geographic proximity of England and Scotland, the integrated infrastructure, the large number of big GB-owned groups with a substantive presence on both sides of the border, and the relatively large and complex nature of the Scottish economy, there are likely to be greater opportunities for groups to shift profits there than may be the case for Northern Ireland.
In addition, corporation tax is a very volatile tax, and would create much more revenue risk for the Scottish budget. For instance, corporate tax receipts fell by 16% from 2008-09 to 2009-10, while income tax receipts fell by 5%. Such a large volatile income stream would place great risk on the Scottish budget. Income tax, which is more predictable and less volatile, is a much more suitable candidate for devolution. The commission based its decision on the strong evidence that it received from the independent expert group and the alcohol retailing and production sector. The evidence identified increased compliance costs and significant scope for tax avoidance, given the mobility of goods such as beer, wine, cider and spirits.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
My recollection is that the Calman commission refused to rule out devolving corporation tax, should that happen in other parts of the UK. Perhaps my recollection is wrong, but it would be a mistake to misrepresent in this debate what the Calman commission actually said.
Mr Gauke
The Calman commission did not recommend devolving corporation tax as substantial practical profit shifting issues would arise, and we cannot ignore the fact that it would need to be paid for. This is not something that we could all sit round in a room negotiating, before coming up with a number. To comply with the Azores judgment, made under European law, it would be necessary to identify the precise number. I should also make it clear that the cost of any reduction in corporation tax would have to be met by increased alternative taxes or a reduction in the block grant.
Dr Whiteford
It is important to differentiate the substantive point of whether this Government support devolving corporation tax from what the Calman commission report actually said. Having found it—I think—I can tell the Minister that the Calman commission recognised that
“changes to Corporation Tax can be a tool for economic development,”
and did not
“rule out a scheme for devolving Corporation Tax in the future as part of wider reform across the devolved nations.”
Does the Minister accept that that is actually what was in the Calman commission report?
Mr Gauke
But the Calman commission did not say that that was the right way forward at this point. As I have said, some very substantial issues would need to be addressed, not least the opportunity for profit shifting and the impact on the UK Exchequer were Scotland to have a lower rate of corporation tax, as businesses operating in Scotland and England would shift their profits to Scotland, which would disadvantage the UK as a whole.
Stewart Hosie
A number of businesses moved to Ireland in the last Parliament to take advantage of lower corporation tax. A number of others moved to continental Europe, to the Netherlands. One of the drivers for this Government reducing corporation tax was to send out that signal. That change will not necessarily be paid for by changes to allowances or spending cuts; it will be paid for in the medium and long term by increased economic growth, which is a consequence of a lower business tax regime. Why has the Minister excluded the potential of growth in Scotland from it having lower corporation tax, and merely highlighted the payment in other ways?
Mr Gauke
Let me be clear: I am not making the case against lower corporation tax per se; I am saying that if Scotland had a lower rate of corporation tax, that would have an impact on the Exchequer, and Scotland and the Scottish Government would have to pick up that cost. I do not believe that that is a matter of dispute or that the hon. Gentleman disagrees with that. Indeed, we are not even talking about something that we could pursue under European law—I am sure that he will be aware of the details of the Azores judgment. [Interruption.] That point is clear, so I am surprised that there are so many mystified faces on the Opposition Benches.
Mr Ian Davidson (Glasgow South West) (Lab/Co-op)
This relates to the Minister’s point about the Azores judgment—people in my constituency speak of little else. I want to clarify the important question of transparency. Have the Government provided the Scottish Government with the figures that the Minister has quoted, in order that they can challenge them or produce any additional information? It is important that this debate is conducted not just at the level of rhetoric, but that firm proposals are made with numbers attached. Will the Minister therefore clarify whether there has been an inter-governmental dialogue on these matters?
Mr Gauke
We are talking about preliminary numbers, which I have put forward on the basis of early estimates produced by the Treasury this week. We are keen to engage with the Scottish Government, just as we have with the Northern Ireland Executive. I am sure that there will be exchanges of correspondence, meetings, discussions and a full examination of both the numbers and the methodology used in producing them. We are more than willing to engage in that process, but we are also waiting for the Scottish Government to offer their analysis of the impact of devolving corporation tax, of what the costs would be, and of the economic advantages and disadvantages. We know that the Scottish Government take a great interest in this—they make this point on a regular basis—but we await their analysis.
Ann McKechin (Glasgow North) (Lab)
I think I am correct in saying that the Minister for Culture and External Affairs in the Scottish Government wrote to Members before the Easter recess suggesting clauses to be added to the Bill, including one on corporation tax. On that basis, is the Minister saying that the Scottish Government provided no information on their analysis of the impact of this tax? Since first requesting the information, how long has he waited for it?
Mr Gauke
I look to others for inspiration on the precise details, but we are certainly talking about months. The hon. Lady is right to say that the detailed analysis has not been provided. I am sure that the Scottish Government are working very hard to produce it, but we have not received it. It could have been helpful for this evening’s debate, but so be it.
Mr Mike Weir (Angus) (SNP)
It might have been difficult for the Scottish Government to provide that information during the purdah period, and they were re-elected only a matter of weeks ago. It is perhaps no surprise, therefore, that those weighty documents have not yet arrived on the Minister’s desk.
Mr Gauke
I have to make a confession to the House: I have come only relatively recently to these issues. My understanding, however, is that the Scottish National party has been interested in this policy for some years. I am sure that if it is a priority, and I understand that it is, we will receive the paper very soon. I look forward to receiving it.
Mr Russell Brown
Perhaps I should be directing this question not to the Minister but to the Secretary of State for Scotland, because he has been engaged in this process. Has there been any indication of how long we can expect to wait for these figures?
Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)
Perhaps the reason the Scottish Government have not yet been able to produce the figures is that some of the international studies are not to their liking because they show that lower rates of corporation tax do not necessarily lead to higher growth rates.
Mr MacNeil
The Minister talks about the Scottish Government justifying why they should have this power, but have the UK Government given any justification for why they should hold on to the power over corporation tax in Scotland?
Mr Gauke
It was about five minutes ago when we last set out the reasons that corporation tax remains a reserved matter. The Bill provides for a substantial devolution of tax powers to the Scottish Government, but corporation tax has always been a matter for the United Kingdom. We are exploring this matter in the context of Northern Ireland, but if there is a case to be made for a radical change in this area, we would like to hear it and we look forward to doing so soon.
Mr Davidson
Did not the Minister say earlier that the Government had produced their latest estimates only about seven days ago? In the circumstances, this criticism seems a trifle unfair, even though the Scottish Government have had a long time to produce theirs. Surely they would benefit from this Government sharing their figures. If the Treasury undertook to pass on its figures to the Scottish Government, I am sure that a response would soon be forthcoming, enabling us to conduct this debate properly and not simply on the level of transitional demands.
Mr Gauke
The hon. Gentleman is clearly anxious to move the debate on, and he makes a perfectly reasonable point. The Treasury and the Government would be quite happy to share our analysis with the Scottish Government, and if that would assist them in their work, we would be pleased to be of assistance.
Stewart Hosie
Speaking of sharing information, the Minister has raised the spectre of the Azores ruling, but a comparable and permanent reduction to the block grant in place of the devolution of corporation tax would certainly meet all the state aid rules. The Azores judgment smokescreen that the Minister has thrown up is quite irrelevant.
Mr Gauke
The point I was making was that the cost would have to be borne by the Scottish Government, through either increased taxes or a reduction in the block grant. We would clearly have to enter into discussions with the Commission, but I think that he is right in principle, and that such a proposition would comply with the Azores judgment. I am merely making the point that, although the final cost would have to be determined, it would be substantially higher than £2 billion if it was the Scottish Government’s policy to bring the rate of corporation tax down to the level that pertains in the Republic of Ireland.
I shall move on to amendment 18, which seeks to make the date for commencement of all the taxation provisions in the Bill—those relating to the Scottish rate of income tax, the Scottish tax on land transactions and the Scottish tax on disposals to landfill—contingent on the consent of the Scottish Parliament. The process to be used to provide consent is not detailed in the amendment, but I assume that the hon. Member for Dundee East has in mind something akin to the legislative consent motion convention to which the Bill is subject. I consider this amendment to be unnecessary. Similar amendments were tabled by the hon. Gentleman in Committee. We have committed to working closely with the Scottish Government as we move towards full implementation of the measures in the Bill. This engagement will ensure that the Scottish Government can keep the Scottish Parliament apprised of implementation work in good time.
As hon. Members will be aware, the Scottish Parliament voted on the Bill in March, with 121 of the 129 Members voting in favour; this included the Scottish Government. Following the election in May, the Scottish Parliament established a new Scotland Bill Committee to consider amendments to the Bill. This will ensure a further opportunity for the Scottish Parliament to vote on changes to the Bill.
As I said on Report in relation to the taxes to be fully devolved, we made it clear in the Command Paper accompanying the Bill that if the Scottish Parliament was not ready to introduce the smaller taxes in April 2015, we would consider delaying the switch-off of the UK-wide versions of the taxes in Scotland. Should the Scottish Government and Parliament decide that they do not wish to put in place a Scottish version to cover the existing tax base, we will not leave the current landfill tax or stamp duty land tax in place. It will be for the Scottish Government to decide what, if any, arrangements they wish to put in place, once the matter is devolved to the Scottish Parliament. I consider this additional requirement to be unnecessary and I am therefore minded to urge the hon. Gentleman to withdraw his amendment, but of course I shall wait with interest to hear his arguments. This has been a somewhat lengthy speech, for which I apologise to the House, but I have attempted to deal with a large number of new clauses and amendments. I hope that that has been helpful, and I look forward to the forthcoming debate.
Stewart Hosie
As the Minister has pointed out, there is a large number of new clauses and amendments in this group. I intend to give them a decent airing, not least because I was chastised by the hon. Member for Glasgow North (Ann McKechin) in a recent newspaper article for speaking for barely 14 minutes in a previous debate. I would not want to disappoint her by not providing closely argued contributions on the new clauses and amendments tonight. It is also worth putting it on record that barely three hours for a Report stage is quite inadequate.
Our amendment 29 and new clause 9 deal with corporation tax, about which the Minister went on at some length. This is a tax levied on profits and the Scottish Government are seeking to devolve the competence to use it as key policy lever to promote economic activity in Scotland. It is important to focus not on the dry detail of the amendments, but on what we and any Scottish Government would do with the powers. We believe that corporation tax can be a key element in the country’s overall economic strategy and can promote economic growth and job creation by enhancing international competitiveness and encouraging innovation and investment.
We believe that the case for devolving corporation tax is clear. Over the past 30 years, Scotland’s economy has grown more slowly relative to both the UK and the average of small EU countries than it ought to have done. We believe that for Scotland to fulfil its economic potential, additional levers are required and corporation tax is, I believe, a key mechanism. It can be an important tool in helping to support increased business start-ups, increased business research and development and investment, and in encouraging more firms to locate their headquarters in Scotland—the very reasons, I suspect, why the UK Government announced a lower corporation tax rate and a strategy for reducing it further.
Jim Sheridan (Paisley and Renfrewshire North) (Lab)
Far be it for me to be a cynic, but could it be that both Governments—the UK and the Scottish Government—wish to reduce corporation tax to appease the big business people who make donations to their political parties?
Stewart Hosie
No. That would be extraordinarily cynical, and not something that even the hon. Gentleman in his daftest moments would actually believe to be true—[Interruption.] The hon. Member for Central Ayrshire (Mr Donohoe) says from a sedentary position that the hon. Gentleman does believe it. That worries me even more. I suspect that that kind of attitude from Labour sends a signal that Britain and Scotland are not open for business, which is a dreadful signal to send out.
We also believe that corporation tax can be used to support the development of new industries, which is vital. As it stands, the Bill contains no new effective levers for economic growth. The UK Government have made it clear that the Bill is primarily about improving financial accountability and political governance. There is no problem with either of those things, but we need economic development as well—and the tools to do the job. We are firmly of the view, as are the Scottish Government, that any transfer of powers to Scotland must include real economic levers to promote jobs and growth.
The argument from the UK Government that we cannot have corporation tax powers might appear rather contradictory. Clearly, there is increasing support for the principle of devolving the responsibility for corporation tax—not least to Northern Ireland, where it is currently under active review.
With those points in mind, I back the Scottish Government in seeking devolved competence for corporation tax to be used as a key policy lever to promote economic activity in Scotland. We are seeking the responsibility to vary both the corporation tax base and the tax rate, with the base defining the element that is subject or liable to be taxed—the bulk of profits, netting out allowances and so forth—and the tax rate being the amount of taxable profit required to be paid during each accounting period. At the moment, that is estimated to be about £2.8 billion for Scotland on 2008-09 figures— and for very good reason that excludes North sea corporation tax. It comes in at about 6.5% of the total tax revenue in Scotland. We believe that the full devolution of corporation tax with an appropriate reduction in the block grant, which covers the Azores issue, would provide the Scottish Government with a new lever to promote growth and jobs.
The position of the Scottish Parliament Scotland Bill Committee was established in a very clear conclusion:
“The Committee’s view is that if a scheme to vary corporation tax were to be available in some of the devolved countries of the UK as a tool of the UK Government’s regional economic policy, it should be available as an option for a Scottish Government to use also.”
That is incredibly important. Now that it is clear that such a tool is being considered for Northern Ireland in the UK Government’s consultation on “Rebalancing the Northern Ireland economy”, it follows that consideration must now be given to devolving corporation tax to Scotland.
Mark Lazarowicz
I want to be clear about what the hon. Gentleman is saying. He said that if there were to be a devolution of corporation tax and the ability to vary it, an appropriate change would be made to the level of the block grant. Does he mean that if corporation tax were reduced in Scotland by £1 billion, an equivalent £1 billion reduction would take place in the block grant? Is he talking about a like-for-like reduction?
Stewart Hosie
It has to be initially to get this kicked in. At that point, the Scottish Government are rightly responsible for their revenue raising and their tax spending within it. That is normal, grown up and quite appropriate.
Mr Brian H. Donohoe (Central Ayrshire) (Lab)
I ask a simple question: what does the hon. Gentleman mean by “initially”?
Stewart Hosie
A permanent reduction for corporation tax to be devolved and taking responsibility for the income we raise to pay for the services we have.
Sheila Gilmore (Edinburgh East) (Lab)
Will the hon. Gentleman let us and Scottish taxpayers know how that financial gap would be met in the period before any economic benefits might arise? Would there be cuts in services, for example, or would the Scottish Government have to consider a rise in income tax for people in Scotland?
Stewart Hosie
The hon. Lady predicates her argument on failure, as Labour Members tend to do. There is no reason to believe that there would be a net loss of revenue to Scotland. Let me put it to the hon. Lady in a different way. The UK went into the recession with £0.5 trillion of debt; it now sits somewhere close to £1 trillion and it is forecast to rise under this Administration to about £1.5 trillion by 2014-15. Scotland, however, has had a net surplus over many years and it is certainly a surplus relative to the UK even in very recent years. Instead of talking Scotland down, we need to be serious about how to gain the powers to grow the Scottish economy and take responsibility for our own actions, which is vital.
Sheila Gilmore
I understand the optimism and do not want to cut through it in any way. However, the hon. Gentleman said that he accepted that there would initially be a reduction in the block grant, which will initially create a financial issue. I was simply asking how it would be met in the short term.
Stewart Hosie
It will not be a reduction because we will have the corporation tax yield, which is comparable to the reduction in the block. It is the same amount of money initially and we take responsibility thereafter.
Stewart Hosie
I have already given way five or six times and I want to make progress. There will be plenty of opportunities for hon. Members to intervene later.
There is a very strong case for additional powers. Evidence shows that corporation tax can be a key element in a country’s overall economic strategy and it has the potential to promote economic growth by enhancing international competitiveness and encouraging innovation and investment. As the Minister said, we have long argued for devolution of corporation tax as a powerful means of addressing the economic challenges facing the Scottish economy. We believe that a centralised and uniform corporation tax structure disadvantages nations such as Scotland to the benefit of London and the south-east of England. To say that is not to be anti-London or anti-south-east; it is just to say that when businesses reach a certain size, they tend, other things being equal, to be attracted to the largest conurbations. In the UK, that of course means London.
The evidence base for devolving corporation tax powers to Scotland is pretty clear. Over the last 30 years, as I said at the beginning, Scotland’s economy has grown more slowly relative to both the UK and the average of other small EU countries. One reason for that relatively weaker economic performance has been the relatively smaller corporate sector in Scotland relative to other parts of the UK. Business birth rates are lower, the business base is smaller and Scottish companies typically engage in less research and development.
As I said, there is also evidence that Scottish headquarters drift south of the border once businesses have reached a certain size. Effective use of corporation tax could serve as a powerful tool to address those trends by improving competitiveness and encouraging investment and expansion. Evidence shows that, at the margin, corporation tax rates can be an important factor in international firms’ decisions about foreign direct investment, which is one of the key objectives of the Scottish Government and Scottish Development International.
At the same time, a number of key sectors in the Scottish economy face tough competition from abroad. Companies abroad receive attractive tax breaks as part of allowances in relation to corporate taxation. The computer games industry, for example, has received a very attractive proposition from Dublin, and receives tax breaks in Montreal that have been denied by our Government despite forceful representations to the Minister by members of all parties. Improvements in those areas will help to boost productivity and, ultimately, the competitiveness of the Scottish economy, which will benefit not just Scotland but the United Kingdom as a whole.
The devolution of corporation tax powers is not solely about making possible the creation of a more competitive environment within the Scottish economy; it also about increasing and promoting accountability. A greater devolution of economic policy levers and tax revenues means that the Scottish Government will have the levers that they need to increase sustainable economic growth, and an opportunity to reinvest the proceeds of that growth—higher long-run tax revenues—in Scotland’s public sector. Having control over corporation tax would also mean that the Scottish Government would bear the risk on the economic levers. We believe that positive reform must be about balancing the revenue and expenditure implications of policy choices, and about giving policy makers the levers to promote economic growth.
Mr Alan Reid (Argyll and Bute) (LD)
According to the hon. Gentleman's logic, if the power were devolved, the Scottish Government would reduce corporation tax. How would the gap in the Scottish Government’s revenue be plugged? Would that be done by means of higher taxes or a lower standard of services?
Stewart Hosie
The hon. Gentleman must have been asleep for the last 14 minutes, because that is precisely the question that the hon. Member for Edinburgh East (Sheila Gilmore) asked. I am surprised that he did not hear or understand my answer to her question, which was that the corporation tax yield would fill the gap caused by the reduction in block grant.
David Mowat
The hon. Gentleman made a powerful point a few moments ago, if I heard him aright. He said that, unlike the United Kingdom, which has a significant deficit, Scotland had experienced a surplus over the last few years. Can he tell us how, in reaching that conclusion, he accounted for the bail-out of Royal Bank of Scotland?
Stewart Hosie
I have two answers to that question. The first is that in the 40 years before the crisis, Scotland experienced a surplus on average. The second relates directly to the hon. Gentleman's question. I am fed up with the argument that runs “Scottish banks bad, English banks good.” There seems to be a failure of basic understanding. Northern Rock took £20 billion, as did the Lloyds banking group. No one seems to speak about Northern Rock. Bradford & Bingley required £37 billion. RBS required £45 billion, but a large chunk of that related to the asset protection scheme. It was not a question of Scottish banks’ being bad and needing to be bailed out while all other banks were fine.
I do not want to drift too far from the new clause, but the Office for Budget Responsibility made it clear in its assessment earlier this year that the net impact of the financial crisis measures would be a surplus of £3.5 billion for the taxpayer. It is interesting that the hon. Gentleman does not seem to know what the out-turn figure is likely to be.
Amendment 25 provides for powers to charge a tax charged on the profits of companies—
Stewart Hosie
Not at this point.
New clause 9 would allow for the introduction of an additional devolved tax charged on the profits of companies, and would require such a proposal to be placed before both Houses of Parliament.
Mr Gauke
I know that the hon. Gentleman is keen to move on from the subject of corporation tax, but I seek clarification, I think with good reason. He said that he understood the Azores judgment and what was necessary for compliance with it. He said that if the yield from corporation tax went to the Scottish Government, the block grant would be reduced and everything would be fine. All that is correct. However, if the Scottish Government reduce corporation tax, there will be a cost. He has not made clear how the Scottish Government would deal with that. Would they do so by spending less or by increasing other taxes?
Stewart Hosie
Evidence that I have seen in a significant number of companies suggests that the reductions in block grant would be phased in. We see a trend increase in business tax yield as business tax rates are reduced. I am sure that the Minister has seen similar figures, which may have driven some of his own policy decisions. I suspect that Scotland would be unique if we did not follow a pattern that has been seen time after time in other countries.
Mr Gauke
The hon. Gentleman is presenting the Laffer curve argument. He suggests that a corporation tax cut could pay for itself. As he knows, I support that idea and am looking at what the Government are doing in that connection. It is not altogether surprising that there are advantages in reducing corporation tax, but, initially at the very least, it comes at a cost. We had to put that in the Red Book. Does he believe that there would be no cost, or does he believe that the tax cuts would immediately pay for themselves?
Stewart Hosie
I am glad that the Minister agrees with my direction of travel. What I am saying is that the Scottish Government would have to take responsibility for the consequences of Scottish Government policy, as is right and proper.
Stewart Hosie
I will give way to the hon. Member for Argyll and Bute (Mr Reid), but then I shall try to move on to excise duty.
Mr Reid
If the hon. Gentleman's argument is correct and reducing corporation tax results in an increased tax yield, that will apply in England and Northern Ireland as much as it will in Scotland. If there are different corporation tax rates in different parts of the United Kingdom and if the hon. Gentleman's argument is correct, surely every part of the United Kingdom will enter into a competition to reduce corporation tax, and we will end up with a race to the bottom to the detriment of all parts of the UK.
Stewart Hosie
I do not want a race to the bottom, but I do believe in tax competition. It is a pity that the hon. Gentleman and his new-found friends do not.
I must now move on from corporation tax to excise duty. Amendment 37 would ensure that provisions relating to alcohol excise came into force two months after the enactment of the Bill. New clause 19 would amend the Scotland Act 1998 so that alcohol duties became an exception to the general reservation in that regard.
All excise duties are currently levied by the UK Government. Alcohol duty is one of the most important excise duties levied in the UK. It is estimated to raise approximately £800 million a year in Scotland, less than 2% of the total tax yield in and on behalf of Scotland. In addition to raising revenues for the Exchequer, one of the key aims of the duty is to reduce excessive consumption of alcohol, which has been proved to lead to a variety of health and social problems. In the current devolution framework, the Scottish budget typically picks up the cost of addressing those problems through police, health and some social welfare costs expenditures. That is done entirely within the Scottish block. Devolving responsibility for excise duty to Scotland would help to ensure that the tax system for alcohol consumption was consistent with the alcohol policy of the Scottish Government and equipped to tackle one of the greatest health and social challenges facing Scotland.
Jim Sheridan
As chair of the all-party parliamentary Scotch whisky and spirits group, I can tell the hon. Gentleman that the Scottish whisky industry is deeply concerned about his proposals. What worries the industry are the administration costs. It would be necessary to designate the final destination of the product, and, even more worryingly, Members of Parliament would bear the additional burden of taking carry-outs from London to their constituencies in Glasgow.
Stewart Hosie
I suspect that any MP trying to take a carry-out through airport security would immediately be stopped.
The devolution of alcohol excise duties would also enable the Scottish Government to implement a revised alcohol duty structure to offer greater protection to the competitive position of Scotch whisky, something we have tried to do on several occasions in a number of past Finance Bills. On 12 May 2009, the vote on alcohol duty took place at half-past midnight. We were trying to implement a fair rate of duty—which we can achieve through the devolution of excise duties—so that alcoholic beverages were taxed on their alcohol content, and on no other spurious measures. Interestingly, five Conservatives managed to vote with us, yet 268 Labour Members voted against, thereby maintaining the unfair level of duty on Scotch whisky. I am sure the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) is sincere in his view, but it does not stand the scrutiny of the recent voting record.
The devolution of excise duties ought to be handled through the devolution of additional powers as described in the amendment, because alcohol duty is levied on all products consumed in the UK irrespective of their country of origin. As a result, the UK Exchequer collects duty on Scotch whisky only if it is consumed in the UK, as exported whisky is not liable for excise duty. Similarly, imported products such as spirits produced overseas are liable for duty when entering the country to be sold in the UK market. We seek to devolve this power, and the Scottish Government seek the responsibility to vary the rate of duty levied on products in Scotland and to implement a more streamlined and efficient system of alcohol taxation that better targets rates of duty to combat binge drinking and excessive consumption of cheap alcoholic products, and that supports a fairer and less discriminatory system for premium products such as Scotch whisky.
Mr Donohoe
Will the hon. Gentleman at least give credence to the fact that over a great number of years previous Governments held back from imposing higher taxes on Scotch whisky, along with all other spirits, and that as a consequence the level playing field he seeks is close to being achieved?
Stewart Hosie
I am prepared to recognise that duty did not rise for a number of years, but that is not the point I am making. My point is that alcohol taxation is unfair because it is based on different types of alcoholic drink, and not entirely on alcoholic strength.
Stewart Hosie
It is no such thing, as I am sure the hon. Gentleman’s contacts in the Scotch whisky industry will confirm.
There is a strong social case for the devolution of alcohol duty, not least because there is clear evidence that, for alcohol, price is a driver of consumption. There is strong evidence from numerous surveys in Europe, America, Canada, New Zealand and elsewhere that levels of alcohol consumption in the population are closely linked to the retail price of alcohol. As it becomes more affordable, consumption increases, and as the relative price increases, consumption falls.
We, and the Scottish Government, are committed to introducing a minimum price for alcohol, and gaining control over the excise duties would provide an additional mechanism to address excessive alcohol consumption. That would help to reduce the annual cost of alcohol misuse in Scotland. Devolving excise duty would enable a future minimum price per unit to be established within the excise system. Under the current system, the introduction of a minimum price is estimated to generate additional revenue for retailers, not the UK or Scottish Government. That was the argument the Labour party made in the Scottish Parliament. Devolving excise duty for alcohol would therefore result in all the additional revenue from increasing the price of low-cost alcohol products accruing to the Scottish Government, and those revenues could then be reinvested in public services in Scotland. The case for devolving alcohol duties is very strong indeed.
Mr Reid
I agree with one of the hon. Gentleman’s points: alcoholic drinks should be taxed on alcohol content. There is a practical problem with his amendment, however. It is my understanding that he wants to increase taxes on alcohol in Scotland, but if alcohol is then priced cheaper just across the border in Berwick or Carlisle, surely a lot of revenue will be lost by people nipping across the border to buy their drink?
Stewart Hosie
There are always borders. The hon. Gentleman was presumably one of the 28 Lib Dems who backed us in 2009. I am pretty sure some of the Lib Dems in the Scottish Parliament now back minimum pricing. I ask for a wee bit of constituency in terms of the policy therefore, and given there are only five Lib Dem MSPs, it should not be too difficult to do a quick phone around.
I turn to the topic of capital borrowing and amendments 26 to 29. We all know that infrastructure investment is an essential contributor to productivity and economic growth. That is presumably why the Chancellor of the Exchequer made great play of spending £2 billion more on capital projects in the comprehensive spending review period than the previous Labour Administration had planned to spend. In the short term, such expenditure can boost economic growth, total output and employment. Over the long term, capital investment, both public and private, is a key driver of productivity, competitiveness and long-term economic growth.
Public sector investment that enhances a country’s physical, technological and digital infrastructure can increase the productive capacity of the economy and drive private sector growth and investment. Indeed, we know that direct capital investment would save or create twice as many jobs as the same amount of investment used for a VAT cut, such is the scale of the economic multipliers of direct capital investment.
Jim Sheridan
The hon. Gentleman is absolutely right that this does create jobs. Can he therefore justify his Government’s cancellation of the Glasgow airport rail link project?
Stewart Hosie
Some projects were simply unaffordable, not least because a number of parties—the other three parties represented here now, in fact—voted for half a billion pounds for the Edinburgh tram system, and look at what an overwhelming success that is!
The Scottish Government are responsible for the vast majority of Scotland’s public investment, covering transport, water, health, education, local government, prisons, housing and so forth. There is, I hope, now widespread agreement across the political spectrum that the Scottish Parliament should have full responsibility to determine the pace and scale of Scotland’s infrastructure investment programme, within a prudent and sustainable long-term financial framework. The Scottish Parliament should have substantial capital borrowing powers to fund productive expenditure for the following purposes: for very large, discrete projects or programmes such as the Forth crossing, which the Minister mentioned; to provide medium-term economic stimulus similar to the accelerated capital programme undertaken in 2008-09 and 2009-10; to smooth the profile of investment in key public services; and to help to lever in additional investment, particularly from the private sector.
Sheila Gilmore
Given what I understood to be the hon. Gentleman’s party’s green environmental credentials, I am surprised that the capital projects he appears to favour are largely to do with roads, rather than public transport, such as the tram proposal that has been mentioned.
Stewart Hosie
The hon. Lady’s surprise is a matter for her, not me. An investment programme is in place that includes housing, environmental and insulation programmes and a large number of other programmes in Scotland, but we are discussing capital borrowing, not the specific projects for which it might be used. That will be a matter for the current and future Scottish Governments.
Sheila Gilmore
I must take the hon. Gentleman up on the point about housing, because I understand—from a recent report by Shelter, for example—that the number of new affordable homes being started in Scotland this year will have fallen from 6,000 to 1,500.
Stewart Hosie
That report is probably for the overall statistics. Sadly, because of the banking crisis, the banks’ withholding of cash and the difficulties with Bradford & Bingley, which funded housing associations, the slack has had to be taken up by the Scottish Government, who have been funding as many new housing starts as is humanly possible. I find it extraordinary that, given the thousands of houses that have been contributed to by the Scottish Government, the hon. Lady or anyone else on the Labour Benches can talk about Labour’s record, which, from memory, was not 6,000, 600 or 60, but six council houses being funded by that Scottish Government.
Stewart Hosie
I have given way twice—I am going to carry on.
As I was saying, the Scottish Parliament should have substantial capital borrowing powers for very large, discrete projects, the provision of medium-term economic stimulus, smoothing the profile of investment in key public services and helping to lever in additional private investment.
Stewart Hosie
Not just now.
However, as a result of the decisions taken by the UK Government in 2010 in the comprehensive spending review, capital budgets available to the Scottish Government are now likely to fall by some 36% in real terms. That represents a cumulative reduction in spending power of around £4.1 billion over the period of the comprehensive spending review. The speed and scale of the cuts by this Government significantly constrain the Scottish Government’s flexibility in managing their infrastructure programme. It is vital that while ensuring the overall sustainability of borrowing—I agree with the Minister on that—Scotland’s capital borrowing facility has sufficient scale and flexibility to enable the funding of productive investments over the long term.
The proposals in the Bill state that from 2015 the controls and limits applied to capital borrowing mean that Scottish Ministers should be allowed to borrow up to 10% of the Scottish capital budget in any year to fund capital expenditure—£230 million in 2014-15—and that the overall stock of capital borrowing could not rise beyond £2.2 billion. They also state that borrowing to finance capital funded by a loan from the national loan fund would be for a maximum of 10 years, but that a longer time frame—for example 25 years—may be negotiated if that better reflected the life span of associated assets such as with the new Forth crossing.
In the written statement of 13 June, the Chancellor and the Secretary of State proposed:
“bringing forward to 2011 pre-payments, a form of cash advance, to allow work on the Forth replacement crossing”
and
“introducing a power in the Scotland Bill that will enable the Government to amend, in future, the way in which Scottish Ministers can borrow”—[Official Report, House of Lords, 13 June 2011; Vol. 728, c. 58WS.]
including through the provision of bonds. Notwithstanding any of that, the £2.2 billion cumulative limit is unchanged.
I am pleased that there is now established consensus among the Scottish Government, the Scottish Parliament, the House of Commons Select Committee on Scottish Affairs and a number of independent experts that the Scotland Bill’s proposals for capital borrowing require substantial enhancement and improvement. That unanimity was reflected in the motion that was agreed unanimously on 9 June in the Scottish Parliament. I make this criticism of the proposals even with the changes regarding our attempt to have capital borrowing devolved so that limits, bond issuance and all these matters are agreed between the Governments on a statutory basis. At the moment, the Bill is predicated on a framework that appears to have been developed without any explicit discussion about sustainability or affordability and without offering any objective means of testing those essential criteria. The annual borrowing limit of 10% of capital departmental expenditure limit seems arbitrary and the proposed total limit on borrowing, set at £2.2 billion, is believed to be too low to make a meaningful difference. Indeed, I think that the Scottish Parliament Scotland Bill Committee in Holyrood suggested £5 billion. The UK Government have not proposed any objective criteria to determine the path of total capital borrowing capacity over time and that builds uncertainty and discretion into the framework. The arbitrary mechanism that the UK Government have proposed for revising this is inconsistent with the basic principles of devolution. The central assumption of a 10-year repayment period for capital borrowing is inappropriate, as public capital assets will typically have a useful life of perhaps more than 30 years. Although helpful, the early implementation measures will do very little to offset the cumulative £4.1 billion reduction in capital expenditure.
The changes are welcome, but we believe that the UK Government’s proposals still require improvement in four key areas. First, the specification of annual limits on borrowing should be agreed between the Governments and not set arbitrarily. Secondly, the methodology for determining the borrowing capacity that is sustainable in the long term needs to be agreed. Thirdly, the terms of repayment for capital borrowing need to be agreed and, fourthly, the impact of the early implementation measures that are proposed also need to be looked at and agreed properly. We believe that should be done within the framework of a statutory agreement between the two Governments, and that is the purpose of the various amendments and new clauses we have proposed. They include amendment 26, which would allow Scottish Ministers to borrow for the purpose of meeting capital expenditure without requiring the approval of the Treasury and without it being by way of loan, and amendment 27, which would mean that Scottish Ministers and the Treasury must both agree to a code of practice and framework within which these things would be agreed. Our amendment 28 would remove the measure that suggests the cumulative borrowing total should be set at £2.2 billion, so it would become redundant when an agreement was in place.
Amendment 29 would remove subsection (10) of clause 32, which introduces the type E procedure. That subsection would not be necessary because the agreement on how Ministers are to determine and keep under review how much they can afford to borrow, the terms and conditions and the sums that may be borrowed and the limit on aggregate at any time outstanding in respect of the principle would be agreed.
Iain Stewart (Milton Keynes South) (Con)
I shall speak first to my amendment 24 before making some broader comments about some of the other amendments and new clauses.
I tabled the amendment as a probing amendment, as I felt there was still some ambiguity about one aspect of the definition of a Scottish taxpayer when it was considered in Committee. My point of concern is to define whether under clause 26 a taxpayer is resident in Scotland at the end of the day if that person is embarking on a cross-border overnight journey—one that departs Scotland before midnight and arrives in England after midnight. I think primarily of my old friend on the Caledonian sleeper, whom I cited in Committee. If the train leaves Glasgow and has crossed the border before midnight, is he deemed to be in Scotland or England at the end of the tax day? The point may seem trivial, but for someone who makes that journey regularly it could be material in defining whether they were a Scottish or an English taxpayer. Obviously, it would also apply to other modes of transport, such as private or heavy goods vehicles and overnight coaches.
It is a probing amendment and it may not offer the most specific or elegant definition, but I tabled it to find clarity. I shall be happy not to press it if alternative wording can be found, or the Minister can give clarity in case the definition is ever challenged in court. I shall return to that point briefly at the end of my comments.
I shall speak briefly to new clause 8 and the related amendments tabled by the right hon. Member for Birkenhead (Mr Field) and others. I suspect that one of our show-stopping debates tonight may be on the Barnett formula and related matters. When I looked at the amendment paper, I thought I would be following the right hon. Gentleman and responding to his points, but I shall have to anticipate his arguments from the interventions and from the new clause itself.
They are a beguiling set of amendments. I agree that at some point we shall have to tackle the whole issue of the Barnett formula and the fiscal relationship between all parts of the United Kingdom. [Interruption.] The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) invites me to give a solution. If he bides his time—
Iain Stewart
I know, but I believe I have a better one and I shall turn to it in a moment.
The arguments are beguiling. The hon. Member for Vauxhall (Kate Hoey) said that she has correspondence from constituents asking why on the face of it Scottish residents have a much better deal from the UK public purse than people in England. I receive similar letters asking why prescriptions are free north of the border, but there is a charge in England. That issue has to be tackled.
Mr MacNeil
Among that raft of questions, has anyone ever asked the hon. Gentleman why the social security spend is higher per head in England than in Scotland?
Iain Stewart
I challenge the hon. Gentleman’s facts, because in preparing for the debate I read that often-thumbed document GERS—Government Expenditure and Revenue Scotland—and the Treasury’s public expenditure statistical analysis, which show, if my interpretation is correct, that social security payments are higher per head in Scotland than in England.
Fiona O'Donnell (East Lothian) (Lab)
Could the hon. Gentleman rise to the challenge of explaining to his constituents why there may be different charges for services between one local authority area and another? If that can be explained, surely the choices made by the Scottish Parliament and Government can also be explained to his constituents.
Iain Stewart
Indeed. If the hon. Lady will let me develop my argument, I shall address those points. There is a lot of misinformation swilling around and we need to arrive at hard evidence-based data so that we can make objective decisions about the future fiscal relationship between the different parts of the United Kingdom.
One of the misleading things is that we often talk about changing the Barnett formula as if that was the whole fiscal relationship between the different parts of the kingdom. In fact, it is a convergence formula; it was designed by Lord Barnett to diminish the difference between Scottish and English public spending over time. The reason why people complain about the formula is that so many elements of public spending are negotiated separately from the formula. Last week, there was an instructive debate about the formula in the other place and I remind Members of the comments of Lord Lang, a former Scotland Secretary. He said that between 2000 and 2002 the Barnett elements of the public expenditure rounds diminished the Scottish block by £17 million, but the total increased by £340 million because of separately negotiated arrangements.
Mr MacNeil
Was any mention made in that debate of the massive defence underspend in Scotland, which is a huge section of public spending where Scotland receives dramatically less than its per capita share compared with the rest of the UK? [Interruption.] I would say more if I was not being heckled by the hon. Member for Glasgow South West (Mr Davidson).
Iain Stewart
If the hon. Gentleman has a little patience, I shall come to what I believe is the solution.
I fear that new clause 8 and the related amendments are a little hasty in dealing with this matter.
Iain Stewart
The Barnett formula has not been in operation for the duration of the Union and only since 1978, so it is a comparatively new beast.
Yesterday, the right hon. Gentleman was speaking in the debate on the Pensions Bill where one of the arguments against the changes the Government are proposing is that the time scale to allow people to adjust their behaviour should not be less than 10 years. A similar approach should be taken to funding; there should be a process of evolution, not revolution. If we rush too hastily into the argument on the basis of misinformation, we risk splitting the Union asunder.
David Mowat
My hon. Friend is right. If a change is made to the block grant, as it must be at some point soon, there will be a long transition period, which may be as long as 10 years, but that is no reason not to do a review, put the matter on a needs basis and start that 10-year period. A transition of 10 years is reasonable.
Iain Stewart
I am grateful to my hon. Friend. I have a suggestion to make about how we can move forward. In this country we have never had a territorially based system of taxation or spending. From taxation receipts we do not know in detail which part of the United Kingdom contributes what in taxes. There are many estimates and forecasts, but there is little hard evidence.
Iain Stewart
I will give way to the hon. Gentleman in a moment. His party, in calculating Scotland’s share of the United Kingdom’s tax receipts, has used very different formulae and assumptions over the years. I do not have the exact figures to hand, but in the space of a few months it came up with a figure for Scotland’s surplus, if that is what it was, which varied by several billion pounds because it used different assumptions in calculating Scottish tax receipts. That is the problem that we have in calculating the true relationship.
Mr MacNeil
Over and above tax receipts, disaggregated spending might be a lot easier. Does the hon. Gentleman believe that Departments such as the Ministry of Defence should provide full figures on how much they are spending in which parts of the United Kingdom? The Government have the power and authority to do that. We have many concerns about the shipyards in Glasgow and about defence spending. As a member of the governing party, does the hon. Gentleman feel that he should be encouraging his side to provide openness and clarity on these vital issues?
Iain Stewart
I am happy to come to some agreement with the hon. Gentleman. My solution is to provide a detailed breakdown on a territorial basis of actual spending and receipts—what is spent and received by each part of the United Kingdom.
Mr Davidson
I understand the point that the hon. Gentleman is making, but with reference to the different parts of the United Kingdom, does he accept that there are enormous divergences among different parts of England, and that that is fuelling much of the sense of grievance felt by many of our English colleagues? Much of this is a within-England problem of unfair distribution, particularly to the north-east and the north-west of England, which ought to be addressed by his Government.
Iain Stewart
The hon. Gentleman anticipates my next point exactly. It is too crude to look at the four constituent nations of the United Kingdom. In Scotland and in England we need to break that down further and look, as he says, at the different needs in the different parts of the kingdom. I will give a constituency example. My constituency, Milton Keynes South, is in the affluent south-east of England, yet I have very deprived wards in my constituency. Taking health spending as an example, what Milton Keynes is allocated as its formula share of health spending in England is capped because there is a transfer to other parts of England. I contend that that is not fair and it disregards some of the areas of need in my constituency, but it illustrates the problem that arises if the formula for analysing spending is too crude.
Mark Lazarowicz
As the hon. Gentleman knows, spending per head in London is almost 50% higher than in the south-east region of England. No one disputes that there are parts of London where there is great need, but other parts which do not fall into that category still benefit from Government spending which is 40% higher than in his constituency.
Iain Stewart
The hon. Gentleman makes a good point. In calculating these figures, however, we should be careful about looking only at per capita spending. Again, I believe that is too crude. It is about the equality of service provision. In a rural area, the cost per head of providing a school place will inevitably be higher because the fixed costs of a building, for example, are divided by a comparatively smaller number of people.
Mike Freer (Finchley and Golders Green) (Con)
Does my hon. Friend accept that allocating funds simply on geography, particularly defence spending, is a misdirection? Defence spending must be based on the strategic needs of the armed forces, not on a geographic spread. Does he agree that that line of argument is completely false in the context of defence spending?
Iain Stewart
My hon. Friend makes a very good point. We also have to look at the equality of the benefits given by defence spending—the protection that accrues to the whole country. It does not matter so much where the defence equipment originates if we are looking at the overall protection that the armed forces provide.
Mr Weir
The hon. Member for Finchley and Golders Green (Mike Freer) makes a valid point as regards defence. The attack on the Barnett formula is based on the fact that Scotland gets more per head, but if we take into account all spending, that is not necessarily the case because of the imbalance in the way that defence spending is allocated—so the figures are important. Where the assets are, for the purposes of this argument, may not be quite so important, but the amount of spending is very important. The economic impact of where the assets are is vital to many communities.
Iain Stewart
I am grateful to the hon. Gentleman for his point. May I infer that he is happy to retain the Trident base in Faslane, given the economic benefits that accrue to Argyll and Bute and West Dunbartonshire?
Mr Weir
There is little or no economic benefit from the Trident base, and there is an extremely disproportionate —[Interruption.] The point is that bases such as the RAF bases in Morayshire are important not only from a defence point of view but economically, and bases such as the Condor base in my constituency are important economically and also from a defence point of view.
Iain Stewart
I challenge the hon. Gentleman’s assumption about the lack, as he sees it, of economic benefits. I also contend that he is making a good case for Scotland's remaining part of the Union, so that the lion’s share of UK defence assets can be based north of the border.
Mr MacNeil
As part of the Union, Scotland currently has a manifest defence underspend. There is no defence advantage for Scotland of being in the Union at all; we are actually losing money by being part of the Union. Far more would be spent on defence in Scotland as an independent country than the Union is spending there, and the shipyards in Glasgow would be in a far better state with an independent Scotland than with a dependent Scotland represented by Labour.
Iain Stewart
I have great respect for the hon. Gentleman in many matters, but this is not one of them. The argument that defence spending in Scotland would somehow be enhanced through independence is not one I agree with. I am not sure whether the Scottish National party’s policy is still to withdraw from NATO, but it used to be many years ago. I see Scottish defence assets only being decimated in the event of independence, so I agree to disagree with him on that point.
I will return to what I propose as a solution. Before we start recalibrating the Barnett formula or developing some other formula or mechanism, we need hard facts on the fiscal relationship between each part of the kingdom. Once we have that, we can move forward on a sensible basis towards having a stable and fair system in the UK. However, I will end on a note of caution. In a previous exercise I looked at other countries that operate some form of fiscal transfers between different parts of the country, such as Australia, Canada and Germany. There are different models in each country, but in all of them the spending relationship between the constituent parts is still a big political issue. I fear that we will never get to a point where everyone is completely happy with the relationship, but I believe that we can arrive at a stable solution.
Mr Davidson
It is important to put on the record that even under devolution Glasgow clearly gets far less than its fair share from a Scottish Government based in Edinburgh. I have just been to the Shetlands with the Scottish Affairs Committee, and people there feel that they are equally badly treated by Edinburgh. We also need a needs-based assessment within Scotland to stop money disappearing and being sucked down into the black hole that is Edinburgh.
Iain Stewart
Having been born and brought up in Hamilton, which is between Glasgow and Edinburgh, I am in something of a no man’s land on that point and wary of intruding on private grief. The hon. Gentleman’s point is an important one. The analysis should be not only among Scotland, England, Wales and Northern Ireland, but among the regions and cities in each nation. I do not intend to press my amendment to a vote, but I would be grateful if the Minister could suggest some alternative working or make some statement.
Mr Brown
I thank the hon. Gentleman for giving way. My intervening on him is causing disruption behind me. Will he look again at his amendment and explain exactly what it means? I am a little perturbed, and I know that he has mentioned sleeper trains and everything, but will he explain again exactly what it means?
Iain Stewart
My amendment is very simple and would remove any ambiguity. If a passenger were on a cross-border overnight journey, irrespective of when the border was crossed, they would be deemed to be in Scotland at the end of the day when that service departed. It may not be the most elegant or precise of solutions, but I felt that in the debate in Committee there was some ambiguity about the position, so the amendment is my attempt to clarify it.
Iain Stewart
Forgive me, but I am going to finish now. Many other Members wish to speak, and I look forward to the Minister’s comments.
Ann McKechin
I welcome the very wise remarks of the hon. Member for Milton Keynes South (Iain Stewart). He always provides us with great expertise on Barnett formula issues, and on the point about having hard evidence, because one key component of our debate about the Bill has been the evidence for the various fiscal arguments that have been proffered over the past few months.
Borrowing powers were not in the original Calman recommendations, but we certainly welcome the inclusion of that tool for the Scottish Government. The Scottish Parliament’s Scotland Bill Committee, in its report, and the Select Committee on Scottish Affairs both recommended that the powers be brought forward from the proposed date of April 2013, and as the Minister will be aware, we have already called for their advancement to 2012. That proposal is in amendment 2.
The Government announced in last week’s written ministerial statement that they are to bring forward to 2011 pre-payments, in order to allow work on the Forth replacement crossing. That is not the same as bringing forward the capital borrowing powers in the Bill, and it would be helpful if the Minister in his winding-up speech were able to confirm that the full capital borrowing powers will be available from the next financial year, if the Bill is on the statute book by that point.
I also welcome the announcement in the statement that the Government are removing the requirement for Scottish Ministers to absorb the first £120 million of tax forecasting variation within their budget, giving them greater flexibility. A number of comments have been made about extending the borrowing limits, and that should be a matter of negotiation between the two Administrations. The Secretary of State says that he views the figure of £2.2 billion as a floor rather than as a maximum, and that is welcome.
My right hon. Friend the Member for Birkenhead (Mr Field)—
Ann McKechin
My right hon. Friend and my hon. Friend the Member for Vauxhall (Kate Hoey), who I understand has reached a memorable birthday, spoke to new clauses on the Barnett formula, and the hon. Member for Milton Keynes South and others pertinently said that there is no easy solution. [Interruption.] I am pleased to see that my right hon. Friend has returned to his seat. In the financial year 2009-10, however, the average per capita expenditure in Scotland was £9,940, while in London the figure was £10,182. Indeed, it has been stated that the move to a needs-based system in countries such as Australia has resulted in the same amount of debate about what is required.
Barnett should not be confused with devolution. Devolution allows the Scottish Government to make their own decisions on a range of issues, such as prescription charges, which do not apply in England, but it is separate from Barnett formula issues. The Barnett formula is relatively simple and objective, and as the Calman commission stated, any changes to it would be difficult to determine and “a highly political process”.
On the new clauses on corporation tax, for the record the hon. Member for Dundee East (Stewart Hosie) spoke about fiscal autonomy for 42 minutes, not 14. However, we are not necessarily any clearer about what impact his proposals would have on the electorate in Scotland. The Calman report specifically rejected the devolution of corporation tax. Paragraph 3.113 of the final report says that
“we therefore reject the devolution of corporation tax. Nor, especially in view of its volatility…from one year to another, do we see it as a candidate for tax assignment.”
Mark Lazarowicz
No doubt there is a theoretical argument that cutting corporation tax for smaller or new businesses would encourage them to grow and expand, but can my hon. Friend explain how cutting the corporation tax paid by Royal Bank of Scotland by 50% would encourage it to bring more jobs into the Scottish economy? Would it not just add to its already large profits?
Ann McKechin
My hon. Friend raises a good point. The Scottish Government are advocating a cut in taxes for banks but not for small businesses that do not pay corporation tax. Many employers in the private sector who employ many people do not pay corporation tax, but income tax. Substantially reducing corporation tax would lead to a large cut in public expenditure or increase the burden on income tax payers.
The Scottish Government already have a considerable number of economic levers. They have decided to cut funding to many Scottish colleges—for example, James Watt college in Greenock faces a cut of £5 million. They have cut regeneration funds in many of the most deprived areas, including a 71% cut in the Inverclyde regeneration fund. The test that the Scots will apply is not how many powers anybody has vis-à-vis someone else but how they use them for Scotland’s benefit. [Interruption.] SNP Members chunter on, but they do not have any intervention to make because these are decisions that they have made and they do not wish to take responsibility for them.
Fiona O'Donnell
Does my hon. Friend regret the macho element that has crept into this debate? Does she, like me, regret the fact that when Alex Salmond came to Downing street with his two friends and sat down with Government Ministers, there was not a single woman around that table?
Ann McKechin
My hon. Friend raises an interesting point about the issues that the Scottish Government have decided not to speak about. They did not come down here to speak to Ministers about the cuts in the welfare reform that will impact particularly heavily on women. They did not come down here to talk about the crisis in our care homes as a result of the imminent collapse of Southern Cross, which affects elderly people and their families right across the country. They did not come down to talk about the increase in the pension age, which will impact on women in particular. My hon. Friend is right that when it comes to issues that affect tens of thousands of people and women in particular, who make up the majority of the Scottish population, the SNP is sadly silent.
Dr Whiteford
The last time I looked, welfare reform and pensions were matters reserved to this House. I certainly contributed to the debates on those matters in this House, and the last time I looked I was a woman. It is sad that when we discussed the uprating proposals in the Pensions Bill, most Labour Members, with a few honourable exceptions, sat on their hands. It was left to just a few of us on the Opposition Benches to oppose the increases proposed by the Government.
Ann McKechin
I do not discredit the hon. Lady for making strong statements in this Chamber. However, I find it extraordinary that the First Minister, who feels that he can speak about any issue that impacts on Scotland and who has more powers, does not take the opportunity to speak about the issues that matter to ordinary people in Scotland every day of the week.
I will return to the Bill, as I am sure you would wish, Madam Deputy Speaker.
Mr MacNeil
Will the hon. Lady clarify whether she is saying that she would welcome the First Minister coming to Downing street to talk about welfare reform and pensions?
Ann McKechin
If the First Minister had anything sensible to say, I would, but as yet, I have not heard it. It is a bit like the corporation tax issue—[Interruption.] The hon. Member for Na h-Eileanan an Iar (Mr MacNeil) needs to calm himself and not get over-excited. The Scottish Government have had many weeks to produce detailed analysis. They have complained that things have been rushed and that we have not had figures from the UK Government on a variety of issues throughout the passage of this Bill, yet they cannot produce the detailed evidence and analysis that would allow people in Scotland to judge whether their calls have validity.
The hon. Member for Dundee East was given five opportunities this evening to explain what the impact would be on Scottish public expenditure if there was a cut in corporation tax. He said in Committee:
“I would like it cut over a number of years”.—[Official Report, 14 March 2011; Vol. 525, c. 70.]
Members may be interested to hear that that has not always been the Scottish National party’s policy on corporation tax. In 1988, a certain Alex Salmond was suspended as an MP from the House of Commons for attacking the Tory Government’s reduction in corporation tax.
Pete Wishart (Perth and North Perthshire) (SNP)
I am grateful to the hon. Lady for the history lesson. Is this what we are going to get from the Labour party for the next few years? I want to encourage her, because the negativity and can’t-do attitude that has permeated the Labour party is partly responsible for the overwhelming defeat that it suffered at the Scottish elections. Please carry on.
Ann McKechin
If that is the level of intellectual debate that we can anticipate from the Scottish Government and their colleagues at Westminster over the next five years, I think Scotland will be in a pretty poor state. Of course, we now have a hierarchy in the Scottish Government depending on whether one is a good Scot or a bad Scot. That is a level of debate that extends even up to judges in the Supreme Court.
If corporation tax was cut in Scotland, public spending would have to be cut in line with it, as we have heard today. The hon. Member for Dundee East suggested that the Scottish Government would take the power, but apply the same rate. That suggests that the power would not provide any benefit or disbenefit, except that they would have to administer the tax at a cost. At some point in the future, they would then apply the tax.
There are questions to which people in Scotland want answers. By how much would the Scottish Government cut corporation tax? The hon. Gentleman spent 42 minutes talking this evening and did not confirm that figure once. What would be the time scale for the cut in corporation tax? Would it be done over two years, three years or four years? We do not know. That is despite the fact that the Treasury, in its evidence to the Scotland Bill Committee in Holyrood in March, stated:
“A 10% cut in corporation tax in Scotland might cost about £600 million per year for an indeterminate period.”
That is understandable given the maturity of the Scottish economy and, as the Exchequer Secretary mentioned tonight, the many large plcs that already have their registered offices in Scotland. Even Northern Ireland’s First Minister, Peter Robinson, believes that Northern Ireland is a special case and has warned Alex Salmond that Scotland could lose up to £1.5 billion if it follows through the bid to set its own corporation tax. Anyone would need answers to the questions I have asked if they are to decide that that is a good idea.
The SNP is reluctant to say whether it thinks Scotland should be a high-tax nation or a low-tax nation. Does it believe in high-quality, good value public services, or does it want a lower public expenditure base, which would mean fewer nurses, doctors and police? There are consequences to that. Does it want an increase in income tax? [Interruption.] The hon. Member for Na h-Eileanan an Iar chunters about scaremongering, but he has failed to answer any of those questions. He should feel free to educate us about the detail of the SNP proposals.
Fiona O'Donnell
May I issue a word of caution to my hon. Friend about encouraging SNP Members to talk for any longer? The hon. Member for Perth and North Perthshire (Pete Wishart) said in his opening remarks that he could talk for days and days about the Bill. Is that not exactly the problem? Every hour the SNP spend talking about these ideas in the House is an hour when we are not talking about the issues that the Scottish people really need us to address.
Ann McKechin
I can understand my hon. Friend’s frustration. It is disappointing that the SNP has not taken the opportunity this evening to provide an explanation and analysis of why they think the change would be helpful.
Ann McKechin
I would like to continue this point.
Does the SNP believe that a further tax cut for banks, which pay the majority of corporation tax in Scotland, is a progressive policy? Does it believe that there should be a shift from corporation tax to personal income taxation, as has been the case in Switzerland, for example?
Ann McKechin
Actually, there has been very little increase in growth in Switzerland. There is no direct correlation, and the evidence is weak.
As I have said previously, and as a report that came out this week clearly indicated, many different levers of economic growth are already in the hands of the Scottish Government, but they have either chosen not to use them at all, or when they have chosen to use them it has had a detrimental effect as well as sometimes having advantages.
Ann McKechin
The Scottish Government have to make those choices, and like my hon. Friend the Member for East Lothian (Fiona O'Donnell), I would like to get on with the businesses of discussing how they are going to use their powers, what they intend to do with them and how they will benefit people. Instead, the SNP has obsessed over process for an indeterminate period. [Interruption.]
Madam Deputy Speaker (Dawn Primarolo)
Order. The hon. Member for Banff and Buchan (Dr Whiteford) has to resume her seat when it is clear that the person who holds the floor, in this case Ann McKechin, is not giving way.
This is not a game, it is a debate, and it would be good if all Members in the Chamber behaved in a respectful way. The heckling is getting a little out of hand, and I am sure some Members would not like me to point out who is doing it at the moment. Perhaps we can return to the debate.
Mr Frank Field
On a point of order, Madam Deputy Speaker. Do you think it possible that by 10 o’clock, I might actually get the chance to speak to my amendment, which has already been dismissed by the Government and debated by other people?
Madam Deputy Speaker
That is not within my gift, Mr Field, but let me say that I sincerely hope so.
Ann McKechin
I certainly hope that my right hon. Friend will have the time to do so, and I hope to conclude my remarks fairly shortly, but I wish to move on to the amendments on excise duty.
The issues relating to excise duty constitute a relatively new demand since the completion of proceedings in Committee. They were not part of the discussions of the first legislative consent memorandum Committee, but will doubtless be discussed in detail by the second LCM Committee. I would welcome further analysis of the proposal’s methodology.
Stewart Hosie
Notwithstanding the hon. Lady’s questions, do I take it from her answers that she sees some potential to remove the obstacle that Labour in Scotland found to minimum pricing? The Labour party’s argument was that an increase in only the retail price went straight to the UK Exchequer and did not benefit the economy generally or the Government in tackling some of the consequences of drinking cheap alcohol.
Ann McKechin
The hon. Gentleman is right to raise the serious problem of alcohol consumption in Scotland. As the Labour group in Holyrood pointed out, simply raising the price and allowing supermarkets to retain the surplus—I think that that was the Scottish Government’s first plan—was neither popular nor logical.
However, it is important to note that excise duty is now subject to an escalator above inflation. The Labour Government introduced it before the general election so that excise duty increases above inflation. Although, following the recession, as might have been anticipated, consumption in England dropped, that has not happened in Scotland to the same extent. There is a significant difference between consumption in Scotland and average consumption in England, despite the identical price and range of products.
Price sensitivity does not seem to apply in Scotland to the same extent as it does in England. That suggests that cultural and social issues are predominantly behind the problem. I do not derive any satisfaction from that. It would be much easier if we could say that a simple price escalation would lead to a reduction in consumption. However, the evidence to date has not shown that that would happen. Indeed, the medical evidence shows that the unit cost would have to be considerably higher than that in the Scottish Government’s proposals to make any impact. Obviously, that would have an effect on the drinks industry, particularly given that much of it is located in Scotland.
The subject is serious. The Scottish Government already have a range of levers at their disposal. The one for excise duty is exceptionally complex and I do not think that the argument for it has been made. Certainly, more needs to be done, but it needs to be based on hard evidence. We also need to realise that some of the things that we would like to do and that we think could work might not be sufficiently strong to make an impact. We might have to reconsider our proposals.
I appreciate that the Scottish Government have begun re-examining the issue because I think that they recognise that providing money to supermarkets was not the way forward. However, the issue is much wider and requires several different measures. The power to ban drink discounting, which the Labour group supported, is already on the statute book in Holyrood. That has still to go ahead. I therefore hope that the Scottish Government will enforce the legislation that they already have on the statute book.
Mr MacNeil
First, I observe that on the minimum price of alcohol, the SNP minority Government were supported by a range of professional opinion. However, is not the hon. Lady’s point on the differences between alcohol consumption north and south of the border an argument for pricing within cultures, as opposed to uniform, blanket, one-size-fits-all pricing?
Ann McKechin
The hon. Gentleman must recognise that the cost of alcohol has increased by slightly more than inflation over the past 20 or 30 years, when, of course, the increase in incomes has been much greater. The Government’s ability to control that gap is limited.
The other problem is that the total price of alcohol is, to a large extent, made up of different forms of tax. When we increase taxation to more than a certain level, we find that there is an increase in black market sales, as we found when we increased taxation on cigarettes. I do not discount the fact that price can have a bearing on consumption, but the evidence to date in Scotland presents us with a much more complex problem, much of which is about cultural and social values. They are the only things that can explain the difference in consumption north and south of the border. The regimes of alcohol selling are more or less the same, but there is increased drinking at home rather than in public houses. The problem is complex, and a range of measures must be put in place to deal with it. My Labour colleagues certainly want to make changes that will make an impact, and they are prepared to have a serious debate.
Stewart Hosie
Finally on that point, and for the sake of completeness, I am sure the shadow Secretary of State would want to confirm that all 17 of Scotland’s public health directors supported minimum pricing, as did the four UK chief medical officers, the British Medical Association, the royal colleges, the Association of Chief Police Officers and many others, including Tennent’s, Molson Coors and Tesco. They saw minimum pricing as an important part of the solution to the problems in Scotland.
Ann McKechin
The supermarkets might well have supported minimum pricing because they would receive a good degree of financial benefit from it. However, some medical experts said that on the evidence, the price per unit would have to be a great deal higher than that proposed by the Scottish Government to have an impact. As I said, although the increase in the excise duty escalator, which the UK Labour Government introduced, has had an impact south of the border in reducing consumption, it has not had the same impact in Scotland. Price sensitivity seems to be different north and south of the border, and there are different patterns of consumption. The focus must be on cultural and social values as much as on simple economic values.
On that basis, there are considerable complexities in any such proposals. The Government’s proposals would have an adverse impact on the drinks industry, which has a substantial bearing on the Scottish economy, but the argument for them has not been made.
Mr Frank Field
I rise to move new clause 8 and the consequential amendment 23, which stand in my name and the names of my hon. Friends.
Madam Deputy Speaker (Dawn Primarolo)
Order. I am sorry to interrupt the right hon. Gentleman, who has waited very patiently for his opportunity to speak, but what he is doing at the moment is “speaking to” his amendments. He is not formally moving them, which would cause a few problems.
Mr Field
Whatever that means, I shall try to move on, Madam Deputy Speaker. I am grateful for that.
I wish to speak to new clause 8 and amendment 23, but I sense that I am interfering in a family row between different factions. As clearly as possible, I want to put the English case, which seems to be lacking in the debate.
This is the first time I have wanted to join in a debate on Scottish matters in the House. That is my fault, though, and I assure my hon. Friends that I will not let it happen again—I now wish to pursue Scottish matters whenever they arise. I have been struck today, listening to a Scottish debate for the first time, by how many of us—myself included, perhaps—failed to think through what devolution meant, and now we have almost hit an invisible brick wall past which we cannot get our arguments.
It seemed to me from observing the recent Scottish elections—obviously my sympathies lay with the party I have the honour to represent in Parliament—even from the language used by English politicians contributing to the Scottish debate that we had not thought through what the limited measure of devolution would mean. We got a pretty good hiding for our trouble on that score. I plead with the Labour Front-Bench team—this is meant as an encouragement, because I know that, as part of our policy review, they are thinking through what should necessarily follow from a defeat on the scale of the one we suffered at the last general election—not to go into the next general election without seriously thinking about the consequences of devolution, not just for Scotland but for the other parts of the United Kingdom, particularly England, where my seat is situated.
I have also been struck by the fact that although people try to mystify us by using various formulas and by saying, “What was given with one hand is taken by another”, I cannot answer, in the light of this debate and the work I have done, the charge put to me by a constituent of mine during the half-term break, when I visited the Scottish Parliament, which is a magnificent building—the extraordinary scale of the domestic architecture was incredibly grand. A constituent of mine greeted me as I went in and asked, “Why is it, Frank, that if I lived in Scotland, I would have free medicines, free long-term care and my children would go to university without paying the fees they pay in England?” Despite all the talk about grants and how we might review them, there is no reply yet to our English constituents on those points. If the explanation is not an unfair distribution of Exchequer grants, I want to know what we have in England that Scotland does not have that might pay for those extraordinary benefits.
Mr MacNeil
The right hon. Gentleman is making an interesting speech and has raised a fascinating point put to him by a constituent of his whom he met in the Scottish Parliament. The only immediate answer I can find to the question he has put to the House about the difference between politics north and south of the border is the existence of the SNP and what it contributes to politics in Scotland.
Mr Russell Brown
I want to put the record straight for my right hon. Friend and his constituents. He talks about free prescriptions in Scotland, which we now have, but I hasten to remind him that there was a period of two to three years when people south of the border with cancer-related problems got their medication free, while people in Scotland were paying for their prescriptions. This is about priorities. The Labour Government rightly made that decision, and it was just a shame that the Scottish Government did not follow suit at the time.
Mr Field
Much as I admire my hon. Friend, I obviously should not have given way, because he is distracting me from the argument that I wish to make, which is a simple one. I am not convinced of the basis for those differences, and neither are many of my constituents. I have affection for the way our different nations have been grouped into the United Kingdom, but I am anxious, because unless we start to face these questions and answer them soon a general sourness will enter into English politics, and we will not be able to judge where that sourness will lead us.
Pete Wishart
The right hon. Gentleman is making a thoughtful speech and a fine contribution, but I am sure that when he talks to his constituents he will want to ensure that they have the correct facts about this argument. Will he at least acknowledge that there is a debate about relative spending between the rest of the United Kingdom and Scotland? Oxford Economics, for example, found that when unidentified spending is factored in, London and Northern Ireland receive more money than Scotland. Will he at least accept that there is an argument?
Mr Field
I might accept that there is an argument; my plea is that the information should be set out clearly for us, so that we can understand if there are differences and, if there are, establish a basis on which they can be defended. If I manage to conclude fairly quickly, I know that there are Members on the Government Benches who have written and spoken about the need for us to move expeditiously to a needs-based formula, although we all understand that if we did that the period in which we phased in the new formula would be crucial. I am not in favour of doing things that rough people up unnecessarily; timing is important.
Mr Davidson
Like the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), who spoke earlier, I think that these are important points. May I suggest to my right hon. Friend that there are two different aspects that he ought to be picking up? One concerns the allocation of money—to some extent I tried to address that when speaking to the hon. Member for Milton Keynes South (Iain Stewart), because there are divisions in England as well—but the second is the choices made by different jurisdictions. The devolved Parliament in Scotland has clearly made decisions that are different and better than some of the things done in England. However, when it comes to waiting lists, services and education, it is also true that some things in England are better than in Scotland. Does my right hon. Friend, like me, welcome the fact that the Select Committee on Scottish Affairs and the National Audit Office are undertaking an evaluation of
“the progress made in various policy areas, comparing devolved Scotland to other jurisdictions”?
Mr Field
The answer to that, briefly, is yes.
Reference has been made to the incredibly interesting debate held in the other place last week. I was struck not only by the unanimity on the view that the status quo cannot hold but by the fact that the Minister replying to the debate found it terribly difficult to marshal a case against all those contributions.
Mr MacNeil
The right hon. Gentleman has mentioned a sourness creeping into politics, which everyone wants to avoid for a number of reasons. The hon. Member for Glasgow South West (Mr Davidson) has just mentioned comparisons across the jurisdictions, and I hope that that would include jurisdictions outwith the UK. Might the right hon. Gentleman find a solution to his problem in full fiscal autonomy, with spending fully correlated to the ability to raise money? After all, I am sure that his constituents do not want to talk to him about the spending in the Isle of Man, Ireland, Norway or Denmark. They feel a grievance because they perceive an over-closeness in the relationship with Scotland, and that relationship would become healthier with a little more distance.
Mr Field
I shall answer that intervention and finish on that very point. We do not have the information that we require to argue these points, and the sourness could ensue when the Scottish Government hold their referendum on independence. I believe that a large force in this House will insist on other parts of the United Kingdom having a say in that referendum. Given the sourness that will result if we continue the debate in the way we have tonight and certainly before now, the irony would be that the SNP could well fail to carry the Scottish electorate with it on independence, while the English electorate would vote for it.
Mr Reid
The Bill and the Government’s new clauses will bring about a substantial increase in the taxation and borrowing powers available to the Scottish Parliament, taking the Scottish Parliament and the process of devolution substantial steps further forward. Since the Scottish Parliament was established in 1999, it has been held back by the fact that it has had very few tax-varying powers and that its role has been largely to spend money rather than to raise it. By giving it these extra powers, we will increase its democratic accountability.
Mr MacNeil
Surely there is more to it than that. I often hear politicians and certain sectors of the media talking about democratic accountability, but is not the bigger issue the need to ensure that we have Governments, in whatever country, who are capable of influencing the economy so that it can grow? More important than politicians being accountable are people having jobs and the economy growing, so that we can live in a more prosperous society.
Mr MacNeil
Is not that argument similar to a golfer being told, “Of course you can go and play a round of golf, but you’re only getting a putter to play with”?
Mr Reid
The Scottish Parliament already has more than a putter, and the Bill will give it a lot more clubs in its bag.
I support the Government’s new clauses. I listened to the hon. Member for Dundee East (Stewart Hosie), who appears to have left us, and I conclude that he has not made a case for his amendments. I want to compare the SNP’s approach to that of the other parties in Scotland. The other parties all worked together within the Calman commission and, through deliberation and working towards consensus, came up with a package of measures to give more powers to the Scottish Parliament. The Government are implementing those measures through the Bill. The SNP, however, refused to take part in that process. It has come along tonight with amendments that have no back-up papers, and it cannot make a case to back them up.
When I questioned the hon. Member for Dundee East, I understood his case to be that if corporation tax is cut, more revenue will come in. As I pointed out in my intervention, however, assuming his case to be correct, if one part of the UK were to cut corporation tax, the other parts would be forced to follow suit and there would simply be a race to the bottom, in which businesses would not be paying their fair share of taxes. That would mean either personal taxes going up or services being cut.
Equally, the hon. Member for Dundee East did not convince me on alcohol duties. All the practical problems were put to him and he was not able to answer them. I understand that he thinks the Scottish Government should increase alcohol duties, but if such duties were lower in England, people who lived near the border would simply travel across it to buy alcohol. No doubt when they were in the supermarkets there, they would buy other things as well, which would be a loss to the Scottish economy.
Mike Crockart (Edinburgh West) (LD)
My hon. Friend makes a fine case, but it is not just the people living close to the border who would do that. A large black market would undoubtedly be created in exactly this type of goods and it would grow across Scotland and contribute to the difficulties that we have already mentioned about the country’s dependence on alcohol.
Mr Reid
My hon. Friend is correct. There would be an incentive for a white van man to drive south, fill up his white van, come up to Scotland and sell the alcohol at a profit. When I intervened on the hon. Member for Dundee East, we heard a sedentary intervention from the hon. Member for Angus (Mr Weir) to the effect that Argyll was not close to the border. However, I would point out to him that for a whole variety of reasons people from Argyll regularly visit England and, if they could buy alcohol cheaper there, there would be an incentive for them to fill up their car with it. That would mean a further loss of income to the Scottish economy.
Mr Weir
The hon. Gentleman is making a case, but for many years people have been going on holiday to other jurisdictions and bringing back alcohol with them; there is nothing unusual in that. The suggestion that all of a sudden there is going to be a massive influx seems to me ridiculous, especially given the cost of fuel in Argyll.
Mr Reid
But they would also fill up their cars with fuel when they were outside Argyll. The hon. Gentleman makes a point. We have heard about booze cruises to Calais, but despite the high price of fuel, it is cheaper for someone in Scotland to drive to England than to go to France. Britain has a certain degree of flexibility over its excise duties because it is surrounded by water. The one land border we have is between Northern Ireland and the Irish Republic and we have all heard the allegations of fuel smuggling. That shows it is more difficult for a country to set its own excise duties where there is a land border than it is when there is only a sea border. With a land border, setting a separate rate of alcohol duties would be difficult.
The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) mentioned that people working regularly in England would be able to take alcohol back to Scotland on the train. That led me to think about what would happen on the train itself—I can imagine the announcement on the tannoy as the train leaves Carlisle: “Get your drink now because in five minutes the price goes up”!
To summarise, the SNP did not make the case for their amendments. Through their new clauses, the Government are giving substantial extra powers to the Scottish Parliament, so I will support the Government tonight.
Mr Davidson
I would like to speak to the amendments but also to refer to some sections of the Scottish Affairs Committee report. Like other hon. Members, I have attended many of these debates and I recognise that this is not the end of the process. We are just mid-way through it.
My first point follows on from my intervention on the Minister about making more information available. It is essential that we try to raise the tone in these debates rather than lower it. Our debates should be based on argument and figures rather than on the yah-boo politics that we see too often in the Chamber between Scottish Members on these issues.
Some Members may remember the “magic bullet” theory. Professors Hughes Hallett and Scott—all three of them—[Laughter]—suggested that simply devolving financial powers to Scotland would result in an automatic boost. That was seen as a panacea and a deal-breaker. Only after a substantial amount of debate did they reach a conclusion. The Select Committee report states:
“when questioned on the relationship between the devolution of fiscal powers and economic growth, Professor Hughes Hallett said that: ‘the empirical evidence is inconclusive on the question of whether it does or doesn’t lead to an increase in the growth rate systematically. Some studies say yes, and some studies say no’… Professor Scott stated clearly, however, that ‘the actual act of giving power does not in itself create a bonus’.”
The exchanges that resulted in that conclusion advanced the debate considerably, and I think that many other matters that we have discussed, such as corporation tax and excise tax, ought to be dealt with in the same degree of detail.
When our Committee produced its report, we said that we were conscious that the misuse of figures resulted in a sense of manufactured grievance which suited some participants in the debate. The way in which to defeat manufactured grievances is to produce accurate figures, and I think that the Government have been slow in producing the full details and slow in producing the facts.
One of the main issues identified by the Committee, which is relevant to some of the new clauses and amendments, is the key principle of transparency. Another is evolution. We need to recognise that the Scotland Bill, and the relationship between Scotland and the rest of the United Kingdom, will constantly evolve. Most people in Scotland believe that an obsession with constitutional detail has diverted attention from real issues on which there is not nearly as much division as many suggest. On a number of issues there is substantial common ground between the nationalists, Labour and the Liberals—the Tories, of course, are beyond the pale—but that is often masked by the obsession with small difference.
At the last moment, points about such matters as excise duty have been produced like rabbits out of a hat. There may not be much division between us in terms of the objectives that we wish to achieve, but there may be much more when it comes to method, and more still when it comes to the interpretation of what are only partial statistics. The Committee stated:
“Progress should not be measured solely by the extent by which powers are sucked into Edinburgh and we will wish to look at how reserved responsibilities can be exercised closer to the people they serve.”
All bar one of its members agreed with the point that I made earlier about Edinburgh being a black hole into which powers are sucked. All who were not nationalists shared that perspective and that of the report. The issue of whether we are philosophically committed to devolution involves decentralisation beyond Edinburgh. Edinburgh is not an end in itself, except for people who happen to live there. The vast majority of people in Scotland want powers to be transferred closer to them, which does not necessarily involve Edinburgh. As people in many parts of Scotland will recognise—
Mr Davidson
Will my hon. Friend allow me to finish my point, for the avoidance of doubt? Edinburgh as a centre of government is as distant from many people in Scotland as is Westminster—or, indeed, Brussels—as a centre of government. Having said that, I shall happily give way to an Edinburgh Member.
Mark Lazarowicz
I am grateful to my hon. Friend for giving way, and I am glad that he made it clear that when he speaks of “Edinburgh” he actually means the Scottish Government and Parliament based in Edinburgh. Perhaps he should use that longer form in future, rather than give the impression that Edinburgh is benefiting from some largesse from the Scottish Government and Parliament, because we certainly are not.
Mr Davidson
If my hon. Friend is saying that the sucking of powers into Edinburgh has not benefited Edinburgh, things are even worse than I thought, and I will certainly take that into account in future.
The Committee dealt in detail with corporation tax, and we also welcomed the Scottish Parliament Committee’s points on the subject. Professor Muscatelli summarised the main reason why, on balance, we came down against the devolution of corporation tax, saying:
“tax competition was the main reason why our group recommended that corporation tax should not be devolved.”
He made the point that it was very likely that a reduction in corporation tax in one UK jurisdiction would result in the cannibalisation of tax from other parts of the UK.
Dr Whiteford
The hon. Gentleman and I sat through some very long evidence sessions with any number of erudite professors of economics, none of whom seemed to agree with each other, but who nevertheless managed to find agreement on some pretty simple principles in respect of corporation tax, one of which was that if we lower it too far we will harm revenue, and if we raise it too high we will harm growth. Those very learned people disagreed because there are so many contingencies and uncertainties at any given point in time, and because the interlinking of the economies of various parts of not just the UK, but the European Union and beyond nowadays, makes it very difficult to pin matters down with any certainty, and therefore they become highly theoretical. Does the hon. Gentleman agree that—
Mr Speaker
Order. That is a very long intervention, but I feel sure that the hon. Lady is nearing her final sentence.
Dr Whiteford
Does the hon. Gentleman agree that the way to secure the Scottish economy is to create jobs?
Mr Davidson
Well, that is a hard one, isn’t it! Yes, clearly the way to improve the Scottish economy is to create jobs, and as far as I am aware not even the Conservatives are against that. The arguments to which the hon. Lady refers were so complex that it seemed at some points that even Hughes and Hallett were disagreeing. [Laughter.]
We did reach conclusions, however. I think everyone agreed that there were risks in devolving corporation tax, and, as we said,
“not least in that this could lead to competition which could result in the ‘cannibalisation’ of the UK’s tax base.”
There was a political difference there, because we went on to say:
“We recognise that this is not necessarily a concern for those who wish to consider the financial position of Scotland in isolation.”
I understand why a nationalist would not be concerned about the cannibalisation of UK taxes if there were a minor gain to Scotland, but for those of us who take a wider perspective across the whole of the UK, that is a valid point to take into account.
It is generally agreed that a reduction in corporation tax in Scotland would result in some drawing in of business from the rest of the UK; I have heard no serious opinion suggesting anything else. If we accept that, we can do no other than recognise that that is not likely to improve relations between the jurisdictions, and as we would hope that in the event of an independent, or further devolved, Scotland there would be an ongoing relationship, beggar-my-neighbour politics on corporation tax is not helpful. The risk of driving that divide between England and Scotland by achieving a marginal gain in corporation tax revenue in the short term is not worth the candle.
Mike Freer
I am grateful to the hon. Gentleman for giving way and I pay tribute to his chairmanship of the Scottish Affairs Committee. Does he also recall the evidence we got from the editor and the business editor of The Scotsman? The issue was not the cannibalisation of corporation tax but the fact that the business community did not trust the SNP not to drive business out of Scotland with a high tax policy.
Mr Davidson
That is true, but that is a slightly different point. The business community was absolutely clear that it was worried not only about uncertainty but that the SNP might end up having an anti-business or a business-unfriendly regime. For the purposes of this debate, however, I was not going to go down that particular route at the moment. It is fair to say that nobody who was raising arguments in favour of the devolution of corporation tax was suggesting that it should be raised, but there was an assumption that devolution was in order to reduce it. It was noticeable that even with the points that were made in the Committee and subsequently we have not heard an argument about how the initial gap between the moneys that were previously received from the UK Treasury and the reduced amount would be made up. Even if in the longer term corporation tax was going to result in a growth in business taxation, which I doubt, there would undoubtedly be a short-term shortfall, and we have not heard any solution as to how that would be bridged.
I have great reservations about committing, in the current economic difficulties and a time of recession, to a set of policies that give more money to the private sector and rich people and that cut services for ordinary people who depend on those public services. That is the choice we are being asked to make. If we are all in this together, as has been suggested, how reasonable is it at a time when Scotland has economic difficulties and faces cuts in its budget, to suggest that the budget should be cut further to give a gratuitous tax break to business? That has to be further explored.
As I said earlier, I do not think this is the end of the matter—it will run and run. That is why the Government have to make available as quickly as possible as much information as they can. I suspect that the Scottish Government produced their figures some time ago and sent them down and that they have either been misfiled in the Scotland Office or lost in the post. I simply find it impossible to believe that after all the huffing and puffing that was done, those figures have not been calculated and sent down here, and I urge the Minister to search at the very bottom of his filing tray just in case poor staff work has misfiled those important documents. We have to make sure that this issue is resolved as quickly as possible.
The point on which the shadow Scottish Secretary was howled down was a very fair one. The interventions from the nationalists managed to distract her from making the important point that in 1988—it is true that was some time ago—Alex Salmond, who was then an SNP MP, was suspended from the House of Commons for attacking the Tory Government’s reduction in corporation tax, calling the proposals an “obscenity”. He might have been right then, but the policies he is adopting now seem slightly different, whereas, if anything, the economic situation is the same. I remember seeing that particular pantomime and, if I remember correctly, Mr Salmond decided to have his intervention because he believed that at a time of economic difficulty cutting taxes for business and for those who had most, for the wealthiest, was an inappropriate use of resources. Exactly the same economic situation pertains now and I think we need an explanation as to why what was an obscenity then is not an obscenity now. I recognise that times move on, cultures change and people develop, so if it was a youthful indiscretion, all well and good. If he tells us that, we may forgive and we may forget, but I very much doubt it. It would be helpful to the debate if that was clarified.
David Mowat
I want to make a few points about the excellent speech made by the right hon. Member for Birkenhead (Mr Field) on new clause 8, but before I do so I shall nail a couple of red herrings.
People have talked about priorities. It is absolutely right that the Scottish Government have the ability to set free prescriptions if that is their priority. It is absolutely right that there can be free tuition and almost free social care. Those priorities should be set in Scotland and it is the Scottish Government’s right to do that. The difficulty arises if they have a different baseline of spending. Nothing I have heard this evening convinces me or my constituents that there is no problem in that regard.
In the course of their remarks a number of Members said that we need more facts on these matters. Who can argue with that? Everyone is in favour of facts. In my previous career, however, when I heard people call for facts, it was often a delaying mechanism. There have been many reviews of the block grant formula over the past two or three years, most recently a superb piece of work by the House of Lords Select Committee in 2008, whose recommendation was unequivocal; similarly, Holtham. The Calman commission made the point that it was not a proxy for need. Most persuasively, Lord Barnett is clear that the formula was never intended to be used as it has been over the past 30 years. He, I believe, will table an amendment to that effect when the Bill goes forward.
I am not making the case for Scotland or Northern Ireland having less money or Wales having more. I am making case for the consideration to be based on need, and I will go wherever that takes us. “Based on need” means that we take into account relative population changes. One of the problems with Barnett is that over the past 30 years it has not properly reflected the fact that in both Wales and England population has increased more rapidly than in Scotland. Similarly, a needs-based formula would look at indices such as how many old people there are in a community, how many very young and how many disabled, as well as unemployment levels and indices of poverty. It is not rocket science. I do not mind what the answer is, but I will answer the question: what is likely to be the result of a needs-based formula?
The most coherent piece of work that has been done on this, notwithstanding the book by my hon. Friend the Member for Milton Keynes South (Iain Stewart), was by Professor David Bell of Stirling university. In evidence to the House of Lords Select Committee, his estimate was that the current allocation that Scotland receives is roughly 120% of that which is due in England and it should be closer to 105% or 107%. A difference of that order implies a yearly difference of £4.5 billion or, over the lifetime of this Parliament, a difference of £22 billion. I do not know if that is right, but Professor David Bell did a lot of work on that, as did the Holtham committee and others in respect of the House of Lords Select Committee.
The question might arise why we need to fix the problem now. There are a number of reasons—not just the fact that the Bill would be a convenient place to do it, although that is true, and not just because of the resentment that is felt in England and Wales. The right hon. Member for Birkenhead used an important word—“sourness”, which debases all of us and it is not the right answer to those of us who are Unionists. If we are not careful, we will be building up a bank of sympathy for devolution or separation in England.
The Bill for the first time equates Scottish levels of income tax to the level of the grant. I am concerned that unless we make the necessary reform to the block grant, it will become almost impossible to do in future. If the figure of £4.5 billion put forward by Professor Bell of Stirling university were correct, that would imply that Scottish basic rate of income tax would have to rise by about 11p in the pound to make up for that shortfall. But that is not the reason that we need to act; there is a moral reason.
I meet my constituents, have seminars and talk about the fact that we have lost Building Schools for the Future money in Warrington. We have lost the education maintenance allowance in Warrington and England. We could pay for an awful lot of things with some of the £4.5 billion. Of course, as many have said, there would have to be transitional arrangements, but that is not a reason for not starting. I think that it would be over 10 years or more.
I am genuinely mystified by the stance of Government Front Benchers on the matter. I have read carefully the replies that Ministers have given when asked about this, and they seem to come back to two basic points. The first, which is often made, is that the formula is expedient. It is true that it is easy to do—my understanding is that the whole thing is done by one guy in the Treasury—but that does not seem a great reason to continue with it. The second is that we are too busy fixing the deficit to make the change and that it must wait. As I said in an intervention, I am prepared to accept that reason, but my understanding is that we are on target to fix the structural deficit by 2015, which is before most of the Bill’s financial provisions will take effect, so I see no reason why we do not start to set up the commission that would have to look at a needs-based formula for Wales, England and Scotland. The formula must be fair, transparent and moral.
One final point I wish to make is that I do not support the amendment in so far as it puts a limit of plus or minus 5% on the amount, which I think is wrong. The point is that it should be needs-based. I would be quite happy if a consequence of the needs-based analysis was that Scotland ended up, as I think it would, with more than 105%. I do not support the amendment for the technical reason I have explained, but its basic thrust is right and it is very important that the House addresses this.
Mark Lazarowicz
I want to make a few points on the question of whether corporation tax should be devolved to the Scottish Parliament, as the SNP proposes. Given the time, I will make my comments as briefly as possible.
There is a respectable intellectual argument that cutting business taxes has a beneficial effect on some businesses and encouraging growth, but we cannot assume that that will automatically be the case. What is important is the effect that a cut in corporation tax would inevitably have on tax revenues. SNP Members were asked time and again in the debate how they could cut corporation tax while protecting public spending, and time and again they did not answer. If their theories are right, businesses might grow in time, but they cannot claim that there will be immediate growth that will make up for a loss in corporation tax. That is not because there is a lack of entrepreneurial spirit among the Scottish people. We must accept that any taxation policy cannot just be a general theory that applies in any circumstance. We have to look at the actual situation in a particular location and at a particular time.
The fact is that the biggest beneficiaries of a reduction in corporation tax in Scotland would be the big banks and power companies, not small and medium-sized businesses. Why on earth would cutting bank taxation encourage the banks to invest more in the Scottish economy and promote jobs? There are many other ways to encourage business growth in Scotland, and at the moment the Scottish Government have those powers. The Bill will give them more such powers, which is what should be done, rather than cutting corporation tax for beneficiaries, which we cannot assume will benefit the Scottish economy and Scottish business.
Another point is that if the Scottish Government were to go ahead with a corporation tax reduction, as they suggest, how can we assume that there would be no response from the UK Government? If the Scottish Government’s policies were to lead to a substantial transfer of businesses from England to Scotland, there would of course be a response at UK level, and at the end of the day that would lead to an overall driving down of the UK Government’s tax base. That in turn would inevitably lead to cuts in public services and public spending, and the SNP has to recognise that if it is to address the issue seriously.
I am not opposed to looking again at taxation and to considering all options, but I do not want us to go ahead with proposals that could have consequences that we cannot reverse. If the SNP is to pursue that line, it has to give us more information about the consequences of its policies. If it does not do so, it will be rightly criticised for coming forward with ideas that are all talk and no reality.
‘“Section 66(5) | Type E”; and’. |
The Secretary of State for Scotland (Michael Moore)
I beg to move, That the Bill be now read the Third time.
I am very grateful to Members who have taken part in all the different debates on the Bill, in particular those from the Opposition parties, members of the Scottish Affairs Committee and the many others who have examined the Bill closely during its passage through the House. Today, we have had important additional contributions by the hon. Member for Dundee East (Stewart Hosie), my hon. Friend the Member for Milton Keynes South (Iain Stewart) and the right hon. Member for Birkenhead (Mr Field), among others.
The Bill delivers the key coalition commitment, set out in our programme for government, to implement the proposals of what we know as the Calman commission. The commission, established in the last Scottish Parliament, had the support of a wide cross-section of society in Scotland. Its membership included representatives of the three main United Kingdom political parties, local government, experts in Scots law, business, education and the trade unions.
Under the chairmanship of Sir Kenneth Calman, the commission gathered evidence from a wide range of sources and engaged directly with people in Scotland through detailed consultations, public engagement events, oral evidence and survey evidence. The commission reported to both the Scottish Parliament and the previous UK Government. At the general election in 2010, all three main UK-wide parties had manifesto commitments to take forward the recommendations made by the commission. Those commitments are being delivered in the Bill.
As Members are aware, the Bill will introduce a new Scottish rate of income tax, and it will fully devolve responsibility for stamp duty land tax and landfill tax to the Scottish Parliament. It will provide for new tax-raising powers to be created at the request of the Scottish Parliament, and it will introduce a new capital borrowing power and extend the current borrowing powers of Scottish Ministers. When combined with the existing tax-raising powers of the Scottish Parliament, it will provide Scottish Ministers with a total of £12 billion- worth of financial powers. That is a hugely significant package, which represents the largest ever transfer of financial powers from Westminster to Scotland. It is a radical but responsible step.
The Bill is not about transferring power for power’s sake; it is about creating accountability. By taking on the responsibility for raising the taxes required to fund the spending decisions that they take, the Scottish Parliament and Scottish Ministers will be more accountable and better equipped to respond to Scotland’s needs within the UK.
The Bill has been the subject of detailed scrutiny on the Floor of the House and by the Scottish Affairs Committee. The debate has been animated, even lively at times, such is the strong feeling and the keen interest in it that is felt throughout the House. However, our proposals have not just been scrutinised at Westminster. After the introduction of the Bill, the Scottish Parliament established a Scotland Bill Committee to assess the measure and the supporting package set out in the Command Paper, “Strengthening Scotland’s Future”. The Scotland Bill Committee issued a detailed 240-page report on the measure. The Committee’s first and main conclusion was that the Scottish Parliament should support the Scotland Bill. In the subsequent plenary vote, the Scottish Parliament voted overwhelmingly in favour of a legislative consent motion, agreeing to the Bill by a margin of 121 to three, with support from the Scottish Government. I am grateful to all parties for their support.
Since then, there have been elections to the Scottish Parliament, and I congratulate the Scottish National party on its victory. A new Scotland Bill Committee—meeting for the first time today—will examine the measure in the Scottish Parliament. I welcome that further scrutiny. However, given the previous Scottish Government’s support for the Bill, I look forward to that support continuing. In fact, I expect that it will have been strengthened by the package of amendments that the Chancellor and I announced on 13 June.
The amendments were based on the valuable report of the Scottish Affairs Committee, and also on the report from the Scotland Bill Committee that the Scottish Parliament endorsed so strongly. The amendments that we tabled on Report were based on the evidence that we received from the two Committees. The amendments to the package will ensure that Scottish Ministers have greater flexibility to exercise their new powers effectively.
We continue to believe that the package set out in the Bill and the Command Paper, based on cross-party consensus, meets the objective of strengthening Scottish devolution within the United Kingdom.
Sir Menzies Campbell (North East Fife) (LD)
May we take it that, as a result of the earlier proceedings, Government new clause 13 is now part of the Bill? If so, is that a confirmation of the fact that in any matter involving human rights, the Supreme Court is the final arbiter, notwithstanding some of the childish and petulant outbursts that we have heard north of the border in recent weeks?
Michael Moore
First, I confirm what my right hon. and learned Friend suggests. New clause 13 is now part of the Bill that will go to the House of Lords for scrutiny. Like him, I regret the tone of some of the remarks made against judges in the Supreme Court in recent weeks. I welcome the broad support for the idea that people in all parts of the United Kingdom should enjoy the same rights under the courts.
Mr William Cash (Stone) (Con)
On the application of the Human Rights Act 1998 in this context, and conceding that the Supreme Court has a special role to play, does the Secretary of State accept that some Government Members, and an increasing number of people throughout the country, feel that the Human Rights Act should be repealed, and furthermore that the whole basis on which it operates and the European convention on human rights should be reviewed?
Michael Moore
I welcome the hon. Gentleman to the proceedings on the Scotland Bill, albeit belatedly, and commend him for his ever sharp eye, looking for opportunities to raise matters European in the Chamber. Perhaps with some disappointment, we will have to agree to disagree on the fundamentals, but I point out that we are indeed considering human rights legislation in this country. I am sure that we will have a proper debate about that over many days and weeks.
Let me outline the key changes that we introduced on Report. First, we will bring forward to this financial year access to finance to allow work on projects, such as the Forth replacement crossing, to begin. We are removing the requirement for Scottish Ministers to absorb the first £125 million of tax forecasting variation within their budget. That will give Scottish Ministers more flexibility to decide how best to respond to any variations in tax receipts compared with forecasts. We will also allow Scottish Ministers to make discretionary payments into the Scottish cash reserve for the next five years, up to an overall total of £125 million. That will help manage any variation in Scottish income tax receipts, compared with forecasts in the initial phase of the new system.
As debated on Report, we have included a provision in the Bill to enable the Government to amend the way in which Scottish Ministers can borrow to include bond issuance. Without that power, further primary legislation would have been necessary to allow bonds to be issued by Scottish Ministers. Before that power is transferred, the Government will conduct a review of the costs and benefits of bond issuance over other forms of borrowing.
We have also strengthened the non-financial sections of the package to enable Scottish Ministers to approve the appointments of MG Alba board members, and to provide for reciprocal consultation between UK and Scottish Ministers when either make changes to electoral administration that impact on their respective responsibilities. We are devolving the power to make an order to disqualify persons from membership of the Scottish Parliament, and we intend to strengthen intergovernmental dialogue in areas of mutual interest in welfare.
Importantly, as my right hon. and learned Friend the Member for North East Fife (Sir Menzies Campbell) indicated, we are implementing the findings of the expert group appointed by the Advocate-General. There is a consensus that there is a problem with the role of the Lord Advocate under existing legislation. The Scotland Act 1998 did not properly recognise that the Lord Advocate fulfils two separate roles: one as chief prosecutor in Scotland, and the second as a Scottish Minister. Our amendment separates those two roles while retaining the consistent application of the protection of fundamental rights for those in Scotland, as exists for those in the rest of the United Kingdom. We believe that it strikes the correct balance.
We believe that the package of the Bill as amended and the supporting non-legislative measures provides the right balance of powers and responsibility for Scotland within the United Kingdom. Today’s debate marks the end of the first stage of debate on, and scrutiny of, the Bill in the House of Commons, but it is by no means the end of the process. There will be further opportunities to consider, debate and amend the Bill in their lordships’ House.
However, as hon. Members will be aware, the Scottish Government have asked for further amendments to the Bill. We have made it clear that we will listen and that we are willing to consider further amendments if they satisfy some key tests. First, any further amendments must be based on detailed proposals. We must be convinced, by evidence and detailed analysis, to support any amendments to a package that we believe provides Scotland with the right balance of responsibility and accountability. Secondly, any further amendments must demonstrate that they will deliver clear benefits to Scotland, without prejudice to the rest of the United Kingdom. Thirdly, any further amendments must generate cross-party consensus, which the measures set out in the Bill have achieved.
Mr Russell Brown
The Liberal Democrats, the Conservatives and the Labour party want this legislation, but the Secretary of State is talking about further amendments. Does he recognise that members of the public wonder why we are going ahead with the Bill, when what lies in front of us at some given point is a referendum on independence? The point has been made to me, by an admittedly small number of my constituents, that we should have parked the Bill, waited for a referendum, and resurrected it thereafter if necessary. Does he recognise that some outside this place will have concerns about further amendments?
Michael Moore
I have just set out the criteria against which we would assess any suggested further amendments. There is scope within the passage of the Bill to consider those points further.
On the hon. Gentleman’s fundamental point, my argument right from the start, which I believe has had a degree of cross-party consensus, is that it is important that we empower Scottish Ministers and the Scottish Parliament with these new arrangements to enable them to get on with their jobs. The measures enhance Ministers’ economic powers and the accountability of the Scottish Parliament. I do not believe that delaying those measures is in anybody’s interest. We do not know what the terms of any referendum will be or what type of independence will be offered.
Mark Lazarowicz
Mine is a narrower point. Will the right hon. Gentleman give an assurance that, if amendments come forward from the Scottish Government that the UK Government accept and which go through the Lords, we will have proper time to discuss them in this House? We do not want three or four amendments coming here for one hour’s discussion during ping-pong. Can we get a guarantee of time to discuss any amendments that come forward? [Interruption.]
Michael Moore
My distinguished colleagues the Leader of the House and the Deputy Leader of House were just indicating—I was going to say “muttering”, but it would be inappropriate to suggest such a thing—in their typically generous fashion that adequate time would be made available should such amendments come forward. I look forward to holding them to that should it be necessary.
The Bill has been subject to detailed scrutiny in this Parliament and the Scottish Parliament. That scrutiny will, of course, continue, but I am confident that the process in the House has reinforced the central purpose of the Bill: to strengthen the Scottish Parliament so that it serves the Scottish people better. I commend it to the House.
Ann McKechin
As we made clear on Second Reading and in Committee, Labour welcomes the Scotland Bill because we believe that it will enhance the devolution settlement. As the Secretary of State mentioned, the Bill was the consequence of a lengthy, evidence-based, serious consultative process that sought cross-party consensus from the very beginning. It reflects many of the recommendations made by the Calman commission, which was established by the then Labour Government following the direct call from the Scottish Parliament for such a group to be set up. Important issues of constitutional change should not be marked by megaphone diplomacy and a never-ending series of demands. Constitutional change must always be based on hard evidence, consensus and consultation, and it should be clearly shown how it will improve the devolution settlement. It is not, for us, a marker on the route to separation.
Labour’s position is that it is not in Scotland’s best interests for the Scottish Government to play constitutional games and demand powers. It is time to start using those they already have, and to knuckle down to the hard task of getting the Scottish economy back on track, lowering record unemployment and generally making Scotland better. Although it is all too easy in the political game to focus on process rather than on policy, the important parts of the Bill are, first, to improve legitimacy and accountability to the Scottish electorate, and, secondly, to use these powers, along with the extensive range of powers granted in the Scotland Act 1998, for Scotland’s benefit.
I would like to spend a little time discussing the Supreme Court new clauses, which unfortunately we did not have time to discuss this evening, and which were not available in Committee. We welcome the fact that the Government did, as we requested, table the new clauses before the Commons stages were completed, and obviously we will want to discuss them in more detail when they reach the House of Lords, but I would like to put on the record what principles should be followed in referring cases to the Supreme Court. Labour fully agrees that the UK Supreme Court should retain a role in determining human rights and European law issues. The UK Supreme Court enables Scots to access justice without the expense and delay of having to go to Strasbourg, and without having to wait for years to have their cases heard. We believe that no one living in Scotland should have less access to the enforcement of their human rights than any other citizen living elsewhere in the UK.
Why would the Scottish Government want to make it more difficult for individuals in Scotland to access justice? Let us recall that it was a famous Scottish case to the Strasbourg Court in the 1980s that brought about the abolition of the belt in schools across the UK when the Court found in favour of two Scottish mothers, Grace Campbell and Jane Cosans. In those days, before the Human Rights Act 1998, cases took years to be heard, and in the meantime tens of thousands of children in Scotland and across the UK were belted right around the place in schools. The Human Rights Act is not about protecting bad people or about an easy escape route from jail; it is about protecting everyone from prejudice and harm.
Pete Wishart
I am grateful to the hon. Lady for her history lesson, but she will know, as the Secretary of State does, that the amendments concerning the Supreme Court are totally unacceptable to the Scottish Government, and will be unacceptable to the Scottish Parliament too. May I suggest to her and the Secretary of State that the expert group under Lord McCluskey should be allowed to do its work before anything further is done regarding the Supreme Court in this House?
Ann McKechin
What I would say to the hon. Gentleman is that we are aware that the McCluskey review is ongoing, and we will wish to consider its conclusions carefully when it reports. We will return to further analysis of the report in the Lords, which I hope will be available by the time this Bill reaches the other place.
We cannot continue this evening without mentioning the extraordinary attack that the First Minister and his Secretary for Justice made on both the Supreme Court and individual Scottish judges who sit in it, when they stated that the UK courts should have no jurisdiction in Scottish criminal cases. Let us be clear: no one is attacking the right for Scotland to retain its unique criminal legal system—I declare an interest, as a non-practising member of the Law Society of Scotland. However, on the other hand, those attacks smack of a political establishment that is too ready to attack anyone who dares to contradict its mantra, rather than one that is prepared robustly to tackle institutional complacency. It is entirely demeaning to Scotland’s international reputation when Scotland’s leading politician uses the language of the playground bully when describing the key relationship between the Executive and the judiciary. Mr MacAskill has referred to the UK Supreme Court as an “ambulance-chasing court”, despite it hearing on average only one Scottish case a year since devolution, and he has ignored the fact—or perhaps he was totally ignorant of it—that his own Scottish Crown Office is making referrals to the very same court.
Mrs Anne McGuire (Stirling) (Lab)
Does my hon. Friend agree that the furore about the Supreme Court over the past few weeks smacks of opportunism, when what she describes has been the situation since the Scotland Act 1998 was passed by this House more than 12 years ago?
Ann McKechin
My right hon. Friend is right to say that this row has emerged from absolutely nowhere, and has arisen simply for the sake of political expediency.
Mr MacAskill—that well-known expert on making sound judgements—also claimed that Supreme Court judges picked up their knowledge of Scots law during visits to the Edinburgh festival, and threatened to withdraw funding. He can now add to his list of achievements that he is the first Minister in any part of the UK who has threatened to close a court by stopping its cheques. Perhaps after such a long-maintained silence over the last two years, the pressure on him was too much to bear.
Sir Menzies Campbell
Of the two cases that have proved so controversial, the first dealt with the protection of a person once charged and taken into custody by the police. The second dealt with whether there is a continuing obligation on the prosecution to make available all evidence to the defence, including evidence that might have the effect of exculpating someone who has been accused. Are those two principles not right at the very heart of the Scottish legal system, to which the hon. Lady has just referred?
Ann McKechin
The right hon. and learned Gentleman speaks with considerable expertise on legal issues. I do not want to discuss the individual cases, but he is absolutely right that they involved important points of principle that everyone who is concerned about the integrity of Scottish law should take seriously into account.
Mr Salmond has attempted to climb down from the remarks that he made in a Holyrood Magazine interview, but has refused to apologise. “Better late than never” should be the new mantra, but the First Minister does not have a reverse gear. Instead, this whole sorry incident has typified a controlling approach that his spin doctors have tried hard to hide. In his view, there is a hierarchy in our national debate between those who are deemed “good Scots” and those classified as “bad Scots”, and anyone who speaks directly against his view will always be in the latter category, even if they are one of our country’s most eminent legal minds.
Mrs Eleanor Laing (Epping Forest) (Con)
I would never claim to be one of our country’s eminent legal minds, but, like the hon. Lady, I am a non-practising member of the Law Society of Scotland. I commend her for her defence of Scots law against the current actions of the Scottish Parliament.
Ann McKechin
I am grateful to the hon. Lady, a fellow lawyer. I do not want to turn this into a lawyers’ conference, however, lest anyone should suspect that we have vested interests. More seriously, this is about the tone of the debate and about the relationship between the Executive and the judiciary, which forms the foundation of our democracy.
I noted in this week’s Sunday Herald that some of the First Minister’s own Ministers and MSPs apparently refer to him in private as the “Dear Leader”. References to any similarity with North Korea might seem comical, but this display fits in better with a paranoid one-party state than with a modern, progressive, advanced 21st-century democracy. I certainly do not believe that everyone who supports the SNP or wishes for independence follows that creed—Jim Sillars is a good example of someone who believes in independence but also believes in listening to other people’s arguments—but it certainly has a home within the SNP “cybernat” sphere.
Mr Cash
Does the hon. Lady acknowledge that the real problem is that this dispute is not so much about the Supreme Court as about the application of the Human Rights Act 1998 to the Supreme Court? For practical purposes, the Scots are entitled to their criminal law, and that has been the case since the inception of the Union.
Ann McKechin
The hon. Gentleman has very particular views about European human rights legislation, but I support it 100%. I believe that the Human Rights Act enhances our legal system, and it is important that people in Scotland should receive the same level of protection as everyone else. The Act is a UK-wide piece of legislation, and it is important that judgments should be made consistently. Accordingly, it is right that there should be one ultimate Court of Appeal that makes important decisions on key points of principle. The Cadder decision, which the right hon. and learned Member for North East Fife (Sir Menzies Campbell) mentioned, was one such decision. It is important to have consistency of judgment, which is one of the parts of our judicial process.
Like most people in Scotland, my domicile arises from birth and not from choice, but I believe that I am exceptionally fortunate to have been born in Scotland at this time in history and I am proud to be a Scot. However, I totally renounce any attempt to mould the politics and culture of the country that I love into one that is marked by a constant placing of the “good Scot versus bad Scot” concept into the dialogue of our public life. That is both dangerous and destructive, and represents a threat to genuine debate. The tactics of the playground bully should form no part of a modern, open Scotland.
Scotland’s legal systems, like any other area of our public life, need to be open to ideas from the outside, and not just from its own legislature. In fact, many of our oldest precepts and concepts are borrowed from a wide combination of other European systems—French, Dutch and Roman as well as English. We have also learned from cases that have occurred in England. It was because we are part of the United Kingdom that one of the most famous cases of tort and delict in civil law, Donoghue v. Stevenson, which took place in my own home town of Paisley, spread across the world. When we genuinely look outwards, we perform at our best; when we revert to inward, defensive complacency, we let our nation down.
This has been an important debate on the future that we see for Scotland. As the Secretary of State has said, the debate will continue over the weeks and months to come, but I want to ensure that it takes place in the context of the hard, reasoned evidence that the Scots demand of us, and that it can be clearly shown to be for their benefit.
Mr Reid
The Bill brings about a substantial increase in the powers that are devolved to the Scottish Parliament, especially those relating to taxation and borrowing. As such, it represents a substantial event in the process of devolution. I congratulate Professor Calman and his commission on bringing forward the proposals after detailed consultation, and on achieving consensus among three political parties. His proposals were subject to detailed scrutiny in the Scottish Parliament Bill Committee and by the Scottish Affairs Committee here. I also congratulate the Secretary of State and the Under-Secretary on their hard work in putting the Bill together and taking it through the House.
It is an old saying that devolution is a process, not an event. This is an important process; there will no doubt be further processes to come, but it is important that the subsequent devolution processes follow the same process as the Calman Commission and the Bill. There must be widespread consultation, detailed evidence should be produced and examined and then the Bill should be taken through after detailed scrutiny. The amendments rejected earlier this evening did not have the detailed evidence behind them.
Mr Davidson
I want to pick up on the issue of process. Amendments have been defeated tonight, but they will probably reappear in the Scottish Parliament. Does the hon. Gentleman agree that before they are debated further in this House, the Scottish Affairs Committee and others must examine them forensically to make sure that the gaps in the evidence that were identified earlier this evening can be exposed so that we can have a proper discussion and debate about the choices to be made?
Mr Reid
I certainly agree with the Chairman of the Scottish Affairs Committee and hope that his Select Committee will subject these proposals to detailed scrutiny.
Two of Scotland’s political parties took part in the original constitutional convention, which went up to three in the Calman commission. The party that has not taken part in any of these processes is the Scottish National party. I accept that it has a mandate for a referendum on independence and I look forward to that campaign. Where I think the SNP goes wrong is that it makes no attempt to bring about consensus within Scotland. Its referendum will fail and I suggest that in future it works with other parties so that detailed proposals can be subjected to scrutiny and we can take the process of devolution further forward. This Bill represents an important step. I hope that the House of Lords will pass it speedily so that all the important extra powers given to the Scottish Parliament can be put into effect.
Pete Wishart
We said on Second Reading that we would seek to strengthen and improve the Bill, offer real scrutiny and support any measures that brought significant and substantial new powers to Scotland. We are pleased that, in a number of areas, this is a better Bill today than the one presented on Second Reading.
I would also like to pay tribute to many Members who participated in the debates, particularly to those who participated in the Calman commission, and to thank people for all the hard work that was done in the Scottish Parliament Bill Committee. Although we did not necessarily agree with everything that was said, I appreciated the conscientious and diligent approach to the work.
Is this the Bill that Scotland urgently requires? I have to say that, unfortunately, the answer is no. Although we have managed to secure some more job-creating powers, this Bill falls way short of the ambitions of the Scottish people as directly expressed only a few short weeks ago, and it still lacks the measures that could have helped to develop our economy and make it grow.
Some of the new provisions are, of course, welcome. We welcome the acceptance of the amendments on borrowing as well as the devolution measures on airguns, speed limits and drink-driving, which will make Scotland a safer place. However, the Unionist parties seem almost incapable of preventing themselves from making re-reservations, which are a million miles away from where the Scottish people are in questions about their constitutional future.
Mr Russell Brown
I thank the hon. Gentleman for giving way; he obviously has some time left. I hope that in the next few minutes he will explain what Bill the people of Scotland are looking for.
Pete Wishart
I think that we had something a few weeks ago that was called an election, and manifestos were presented for it. One manifesto had plans for including job-creating powers in the Scotland Bill and the other manifesto was produced by the Calman commission parties. I think that the Scottish people made clear which direction of travel they support.
Pete Wishart
I will not give way to the hon. Gentleman again.
We know what the Scottish people want when it comes to such matters. I was disappointed to hear what was almost a rant from the hon. Member for Glasgow North (Ann McKechin). Members’ personal attacks on the First Minister suggest that they have learnt absolutely nothing. Negativity does not win elections, but we hear continued, incessant negativity.
Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)
Will the hon. Gentleman give way?
Pete Wishart
I do not have time to give way.
I can only ask Members to continue down that route so that we can continue to secure victories such as the one we secured only a few short weeks ago.
Pete Wishart
I have only 10 minutes left.
The Bill contains unpalatable measures that are totally unacceptable to the Scottish Government, and which were aired a moment ago, concerning the Supreme Court.
Sir Robert Smith
The hon. Gentleman spoke of a personal attack on his leader from the Opposition Front Bench. Does he not think that the head of a Government in a proper, modern, functioning democracy should show respect for the courts, which protect the individual citizen from abuse of power by the state?
Pete Wishart
I am almost grateful to the hon. Gentleman, because he has referred to a measure I want to deal with. The measure relating to the Supreme Court that was passed today is totally unacceptable to the Scottish Government, and will be unacceptable to the Scottish Parliament as well. When the last Scottish Parliament Bill Committee considered the Government’s proposals, even that Unionist-led Committee did not see fit to pass them. I do not think that a new Scottish Parliament Bill Committee will be any better disposed towards them.
Had I been given an opportunity to debate the issue, I would have suggested a sunset clause, so that nothing could be done until the expert group in the Scottish Parliament finishes its work under Lord McCluskey. That is the time for us to discuss how to resolve what is a real issue.
Pete Wishart
I have said that I will not give way again, and I will not, even to the right hon. and learned Gentleman. Others wish to speak.
There are real difficulties, but the solution offered by the Secretary of State will not be acceptable to the Scottish Parliament. The most critical aspect of the Bill, however, involves not the unpalatable measures that we have discussed today, but the measures that the Bill omits: measures for which the Scottish people voted when the Bill was last considered by the Scottish Parliament. What they want are job-creating powers and control over the Crown Estates so that we can further the renewables revolution in Scotland.
Given our mandate, the Scottish National party will revisit those issues in the future. On balance, however, we accept that the Bill contains substantial new powers, and we will not oppose its Third Reading.
I suppose that we can look at the Bill in two stages—pre and post its testing by the Scottish people. The Calman parties stood on their record and presented it as a major constitutional issue when they fought the election, while the Scottish National party stood on a programme involving the creation of new jobs and powers for the Scottish Parliament. The Scottish people gave the Scottish National party an overwhelming mandate to pursue that agenda, and we will continue to present the case for real job-creating powers. We will not be satisfied until we have those powers in the Scottish Parliament.
The Bill will now go to the House of Lords before it is returned to the Scottish Parliament for a further legislative consent motion. I say to the Secretary of State and the Government—
Pete Wishart
I am not going to give way to the hon. Gentleman. Must I say that a third time?
I say to the Secretary of State that he should not use the fact that there are no Scottish National party members in the House of Lords to introduce any further unpalatable measures, because that would be totally unacceptable. It is democratically elected Members who should decide the fate of our nation, not unelected appointees, donors and cronies.
Pete Wishart
I am not going to give way to the hon. Gentleman. As he is standing right next to me, I do not know why he cannot hear me.
Mr Speaker
Order. The hon. Member for Paisley and Renfrewshire North (Jim Sheridan) must resume his seat.
Pete Wishart
Thank you, Mr Speaker. It takes a long time for Members to understand that I am not going to give way.
Once the Bill has completed its passage in the House of Lords it will return to the Scottish Parliament, and a further legislative consent motion will be required because of the many amendments passed by the House of Commons. I know that colleagues in all parties in the Scottish Parliament will want to look closely at a number of those amendments, and I know that the Secretary of State and the House will respect the views of the Scottish Parliament. I know they will accept that the Scottish Government have a massive mandate.
Many Members have talked about this being part of the devolution story, and it is. This is the second major Bill on devolution to have come before the House. The devolution story will continue to unfold, and we will continue to go down that road, but a new story is now also starting to emerge. It is about a new journey that Scotland is about to embark upon, because at some point over the next few years we will have a proper referendum on the future of Scotland—a proper, constitutional referendum that will be about independence, and I am absolutely sure that the Scottish people will make the right choice and that Scotland will once again join the nations of the world.
Mr Speaker
Order. In calling Mr Iain Stewart, I ask him to consider the merits of allowing a couple of minutes for the Chairman of the Select Committee, but it is up to him.
Iain Stewart
Thank you, Mr Speaker, I shall make a very brief contribution. I just want to congratulate the Government on introducing this Bill, as its provisions are a sensible evolution of the devolution settlement.
From an English perspective, I think the Bill will go some way towards allaying the concerns felt by many of my constituents about a perception of unfairness in the spending arrangements. I agree that the Scottish Parliament should be responsible for raising a significant chunk of the revenue it wants to spend on services, and this presents a sensible way forward. It will not be the end of the matter, however. There will be further debates on the arrangements between Scotland, England and the rest of the United Kingdom.
I am an unashamed Unionist. I believe that the strength of the United Kingdom is greater than that of the sum of its parts, and I want it to continue always. Others on both sides of the border disagree with that, but I make this plea: whatever further changes are suggested, let them be based on evidence, be sensible, be practical and not be part of some silly constitutional game-playing. The economy of Scotland, and indeed of the whole United Kingdom, is still fragile, and the last thing we need is years and years of constitutional uncertainty. As we send this Bill to the Lords for further consideration, I congratulate the Government again and make that plea for a sensible, evidence-based, common-sense solution.
Mr Davidson
It is very difficult to summarise several months of work in three minutes. I commend the Scottish Affairs Committee report to the House, and I hope everyone will read it carefully.
A number of points are worth repeating at the conclusion of our debate. Although I recognise that this is not the end of the story and that discussion will continue, the question of transparency in the figures is vital; that cannot be over-emphasised. If amendments from the Scottish Parliament are to be debated, they must be scrutinised as the proposals from Professor Hughes Hallett and Professor Scott were scrutinised—and, of course, in the end those proposals fell by the wayside because they were found to be wanting.
We must also recognise that financial pressures on the Scottish Parliament are likely to result in pressures for decisions in areas that did not previously have to be addressed. Hard choices are going to have to be made, so it is therefore again essential that the necessary information and arguments are put forward.
We must also be clear about what the verdict of the Scottish people was. Some 50% of the people in Scotland did not vote in the election. [Interruption.] Of those who did vote, fewer than half voted for separation. [Interruption.] We must remember that more people voted for my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) to be Prime Minister than voted for Alex Salmond to be First Minister.
Not everything the Scottish National party proposes is accepted, therefore. We must remember that Alex Salmond called clearly for a yes vote in the alternative vote referendum and was roundly defeated. [Interruption.] I notice that efforts are being made to shout me down. That is what has traditionally happened in Scotland when people have challenged the nationalists, and those of us who want to challenge the narrow neo-fascism of the nationalists have got to be prepared to have discussions—
Stewart Hosie
The use of this neo-fascist description is absurd, offensive and wrong in every single regard. What powers, Sir, do you have to ensure that this nonsense is not said or repeated?
Mr Davidson
Is it not neo-fascist to attempt to shout down speakers with whom one disagrees? We have had robust debate in the House on several occasions, but it has frequently been the case in my constituency, after I won it from the nationalists, that they have attempted to shout me down.
Mr Speaker
We are about to come to the Adjournment and I appeal to right hon. and hon. Members who are leaving the Chamber to do so quickly and quietly to afford a fair hearing to Mr David Amess.