Denial of Banking Services: UK Defence Sector

Lord Browne of Ladyton Excerpts

Wednesday 4th June 2025 Lords Chamber

[Lord Livermore (Lab)]

I was not quite sure where the noble Baroness’s question was going, but I definitely agree with where it ended up. The Government have made it absolutely clear that we consider defence an ethical investment. We do not see a conflict between sustainable investment and investment in our world-leading defence sector. At the end of the day, it is not for the Government to tell investors what they can and cannot invest in, but at a time of increasing geopolitical instability, supporting the defence sector has never been more critical.

[Lord Browne of Ladyton (Lab)]

My Lords, perhaps I may ask a supplementary to the excellent Question asked by the noble Lord, Lord Sharpe of Epsom, based on the experience of an entrepreneur and inward investor who plans to build a much-needed factory in the United Kingdom to manufacture weapons-grade ammunition and who has been refused access to banking facilities, because of the defence nature of his proposal, by one of our leading banks. As the strategic defence review makes clear, one criterion for success over the next few years will lie in the number, scale and diversity of defence and dual-use technology companies in the UK. The review also emphasises the need for a whole-of-society approach to defence. With that in mind, does the Minister agree that we must ensure that banking facilities are more readily available beyond the historic primes to defence companies, particularly those which aspire to be, or are, suppliers to the UK Government, and that our procurement should support SMEs to do just that?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question, and I agree with everything he said. The Government have been clear that no company should ever be denied access to financial services solely on the basis that they work in the defence sector, and the banking sector should never take a blanket approach to any one sector. I very much recognise the story that my noble friend tells, and that SMEs face unique challenges working in the defence sector, compared with larger, more established suppliers, including in accessing financial services, as the noble Lord said in his original Question. As my noble friend said, they face difficulties opening bank accounts and an increased risk of sudden bank account closure, as well as higher costs of borrowing and access to capital, and they often face a higher compliance burden. That is why we have set out that supporting and unlocking the full potential of SMEs will be a key consideration of the forthcoming defence industrial strategy.

National Debt: It’s Time for Tough Decisions (Economic Affairs Committee Report)

Lord Browne of Ladyton Excerpts

Friday 25th April 2025 Lords Chamber

[Lord Browne of Ladyton (Lab)]

My Lords, it is a pleasure to have the opportunity to participate, albeit briefly, in this morning’s proceedings. I enthusiastically join all previous speakers in congratulating the noble Lord, Lord Bridges, and the wider committee on its report. It provides a forensic, grim and justifiably challenging—drawing on adjectives used by other noble Lords—diagnosis of many of the long-term challenges in which we engage in the interests of economic sustainability.

For reasons of both brevity and modesty, given the superior qualifications of other noble Lords—almost all who have spoken—to engage with the finer points of economic theory, I plan to discuss a couple of specific elements from chapter 4 of the report. First, I should like to mention the opening of chapter 4 and the section on underlying demographic factors.

When the welfare state was created, there were around five workers for every pensioner. Today, that figure stands at around 3.5, and, as other noble Lords have spoken about, ONS figures suggest that that ratio will narrow exponentially from the 2030s onwards. In autumn last year, the Prime Minister rightly told an interviewer that he was not in the business of telling people how many children they should have. However, Dr Paula Sheppard has identified that there is a fertility gap of 0.3% in the UK, meaning that, for every three children wanted, only two are born.

It was in similar circumstances that the previous socialist Prime Minister of Finland, Sanna Marin, commissioned work that was successful in policy adjustments to ensure that women, couples and families who wish to have children do so in a public policy environment that seeks to empower them to realise that wish. France has shown us that family-friendly policies can have a material impact on long-term demographics, and it may be an area of policy that repays further consideration.

Secondly, as paragraph 101 outlines, it is clear that much of the fiscal space that allowed the expansion of social and welfare spending as the welfare state expanded into its modern dimensions was afforded by a dramatic decrease in defence spending from the 1950s onwards. Defence spending, when handled properly, is long term and strategic as well as reactive—a necessarily swift response to geopolitical uncertainty. Nothing in the auguries that I have seen suggests that the current uncertainty and strategic jeopardy that we face is likely to abate in the near future. Modern wars do not end.

This means that we must anticipate at least the possibility of a further expansion of defence spending, and that this will be calculated not to an economic slide rule but to the magnitude of the threats we face. Again, as paragraph 103 of chapter 4 makes clear, this will have consequences for other areas of government spending. Carl Emmerson from the IFS gave evidence to the committee and described the decades-long practice of diverting savings from the defence budget to other, perhaps more electorally appealing, areas of government activity. As we have seen, not least through the determination of the actions of the Prime Minister and the Defence Secretary, this period is now at an end. This will have political and structural ramifications that will continue, certainly over successive Governments.

In closing, I reiterate my welcome for this report, not least because it demonstrates, even if somewhat elusively, the unenviable economic circumstances this Government inherited. I look forward not merely to my noble friend the Minister’s response but to the Government’s continued work to engage these challenges.

Strategic Priorities Statement: Defence

Lord Browne of Ladyton Excerpts

Tuesday 25th March 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, but I am not sure he listened to the first Answer I gave. I very clearly said that the statement of strategic priorities sets out how the National Wealth Fund will invest in defence. It says very clearly that it should invest in

“dual-use technologies and … support supply chain resilience across these priority sectors, to better support the UK’s defence and security”.

It also says that the National Wealth Fund

“should consider the role it can play in supporting the delivery of the wider Industrial Strategy, including in defence”.

That wider industrial strategy absolutely achieves many of the things the noble Lord is talking about. The strategic aim of the defence industrial strategy is to make sure that the imperatives of national security and a high-growth economy are fully aligned.

[Lord Browne of Ladyton (Lab)]

My Lords, I thank the noble Lord, Lord Jackson of Peterborough, for bringing the attention of your Lordships’ House to this issue and once again encouraging me properly to research a subject. On 19 March, the Chancellor wrote to the CEO of the National Wealth Fund to communicate the Government’s strategic priorities for the fund. That latter document on three occasions explicitly identifies defence as a priority under Investment Principle 2. It also goes on to enjoin the CEO to refer, in assigning priorities, to the Government’s industrial strategy Green Paper, which in turn refers to the importance of the UK’s defence sector no fewer than 38 times. The former Conservative Business Secretary, Greg Clark, described that Green Paper as a serious and substantial document and applauded it for singling out eight sectors, including defence, as priorities. Does the Minister agree with me that it is reasonable to expect the CEO of the fund to read beyond the press release and to examine in depth the correspondence and references to which his attention has been drawn?

[Lord Livermore (Lab)]

I am very grateful to my noble friend for his question. He far more eloquently than me set out what I was attempting to say in my previous answer. He draws attention to the importance of reading the documents that are in your Question before tabling your Question.

Financial Assistance to Ukraine Bill

Lord Browne of Ladyton Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 15th January 2025 Lords Chamber

[Lord Browne of Ladyton (Lab)]

My Lords, it is a pleasure to have the opportunity to rise to offer unambiguous support for this Bill. I thank my noble friend Lord Livermore, the Financial Secretary to the Treasury, for his characteristically clear introduction to this debate. I, like others, am looking forward to the maiden speech of the noble Baroness, Lady Batters. I am pleased to follow the noble Lord, Lord Blencathra, and to commend him for the same reasons my noble friend the Minister did: his consistency and his contribution in this area, with particular reference to the issue that informs his regret amendment—which I regret I cannot support. I will come back to that in a few minutes.

This is a short Bill, but one freighted with enormous consequences, as we have heard from the contributions thus far, which were characteristically cogent for your Lordships’ House. It gives effect to our commitment to devote £2.26 billion to the G7 extraordinary revenue acceleration loans to Ukraine scheme, the ERA. This is separate from the £3 billion of military aid that we will also provide this year. I applaud Ministers for their decision to hypothecate these funds and to ensure that they are directed squarely to military procurement.

It is worth being clear-sighted about the purpose of this disbursement. It is to enable Ukraine to stand against unprovoked aggression and to ensure that the new era of great-power competition that is already upon us does not see the normalisation of such aggressive expansionism—a course taken by powers who see their own strength as justification enough for such actions. It is clear that the incoming US Administration cannot necessarily be relied upon either to shoulder its share of the burden in the provision of military support for Ukraine, or indeed to enforce international norms around the appropriate behaviour of great powers or aspirants to that status.

Last week, the President-elect offered a justification for his threat to annex Greenland either by force or via economic pressure. In a somewhat circular piece of logic, he asserted that such a course of action is justified by the fact that the US “needs” Greenland for its economic security. Although Putin’s speech that launched the invasion of Ukraine was more rococo in style, the central message was remarkably similar: that Russia had the moral right to invade to protect its own security interests. In making this comparison, I emphatically do not suggest a scintilla of moral equivalence between the two men or the countries they represent. But taken together, the US, Russia and China will help shape the new norms of this era of great-power competition. As we debate this Bill, we have to ask ourselves what lessons President Xi, for instance, will draw from recent history as he contemplates what he considers to be the daily annoyance of a free and independent Taiwan.

Being mindful of these precedents is one of two reasons why I believe this Bill and our wider aid for Ukraine is important. The other is the state of public opinion in western Europe. In democratic politics, public opinion today is in general a pretty accurate guide to the attitude of leaders tomorrow. That being the case, polling conducted by YouGov in December makes sobering reading. It reveals that in seven key European countries, including our own, support for continuing assistance for Ukraine has fallen markedly. Equally, support for ceasing support and reconciling ourselves to a compelled peace, even on terms markedly unfavourable to Ukraine, has increased.

To some extent, this is a consequence of the more ambivalent US attitude Europeans expect from the new Administration when they take office. The figures are striking, none the less. In Germany, Spain, France and Italy, support for continuing assistance to Ukraine is now lower than for concluding a peace favourable to Russia. Even in Britain, there is only 4% between the two options.

Concerning though these figures are, the purpose of government is not to act as a weathervane reflecting public opinion but to lead it. I applaud the efforts of Ministers in the previous Administration—not least the noble Lord, Lord Ahmad, who I regret is not in his place to hear this—in the support they afforded Ukraine. I also have complete confidence in the Ministers on our Front Bench and in the other place; I am sure they will prove equally adamantine in their resolve.

What Ukraine needs is constancy, and the mechanism to which this Bill gives effect provides that. An ebbing of our support and that of our allies would lead to a collapse of the rules-based international order, a spiralling refugee crisis and the subjugation of a free and sovereign people. It would be not only morally wrong but run counter to our own interests and those of any country which values stability and collective security.

In 1941, President Roosevelt gave one of his celebrated fireside chats in which he described the US as an “arsenal of democracy”. It contained some words which apply to our situation, as they did to his:

“We have furnished … great material support and we will furnish far more in the future. There will be no ‘bottlenecks’ in our determination … No dictator … will weaken that determination by threats of how they will construe that determination”.


It is in that spirit that I offer this Bill my unambiguous support.

There is more to do in exploring the use of frozen Russian assets, but that lies outside the scope of this legislation. I am sure that those who support that ambition and who are yet to speak, or who will speak on other occasions, are aware that there was a Back-Bench debate on this issue in the other place, led by the Liberal Democrat Mike Martin, on 6 January. I draw noble Lords’ attention—I am not stepping in for the Minister; he is perfectly capable of doing this himself— to column 671 of that debate. Stephen Doughty, the Minister of State at the Foreign, Commonwealth and Development Office, responded to the debate. I will read the following passage in full to your Lordships:

“The fundamental questions about what more we can do to use Russian assets for the benefit of Ukraine were at the heart of the debate. The Government and our G7 partners have repeatedly affirmed our position. Russia’s obligations under international law are clear: it must pay for the damage it has caused to Ukraine. The ERA loan and our contribution will ensure that Ukraine can receive the financial support that it needs now—it was right to focus on getting that out the door, because we urgently need to support Ukraine now—with the profits generated on sanctioned Russian sovereign assets providing that. I reassure colleagues throughout the House who have rightly asked a lot of searching and challenging questions that we are committed to considering all possible lawful avenues by which Russia can be made to meet its obligation to pay for the damage it is causing to Ukraine. We continue to work with allies to that end”.”.—[Official Report, Commons, 6/1/25; col. 671.]


Thereafter, the contributions, few that they were in that debate, were supportive of that position, as I am.

It is in the spirit of President Roosevelt that I offer the Bill my unambiguous support. I am proud that we have devoted to Ukraine more assistance than any other single country save the US and Germany, and trust that we will continue our support, conscious that Ukraine is not defending merely itself but the UK and all its European allies and friends.

Authorised Push Payment Fraud Performance Report

Lord Browne of Ladyton Excerpts

Tuesday 14th November 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, it would be interesting to look at that and at how that data might be collected. The point at the heart of my noble friend’s question is absolutely right. Banks have a responsibility in this area, and that is why the reimbursement obligation is coming forward, but others have an obligation in this area too. The recent Online Safety Act imposes new obligations on the largest social media companies and platforms to prevent their users being exposed to harmful content, including fraudulent content. I am sure those measures will make a real difference too.

[Lord Browne of Ladyton (Lab)]

My Lords, APP fraud rose by 20% in the first half of this year alone and, according to the Payment Systems Regulator, customers of banks and building societies have wildly different and divergent experiences of receiving compensation and restitution. While I welcome the mandatory reimbursement requirement that will come into force next year, in the meantime, what consideration is being given to mandate appropriate resourcing of out-of-hours fraud and complaints teams within banks to ensure that where an APP fraud has occurred it can be reported and acted on with appropriate speed?

[Baroness Penn (Con)]

As the noble Lord has noted, a significant step towards ensuring greater consistency and user experience will be the mandating of reimbursement; we already have 10 signatories to the voluntary reimbursement code. Of course banks need to have proper processes in place to deal with suspected fraud, and I think publications such as the data we had at the end of last month shine a light on how banks are performing and allow consumers to make informed choices about where they bank.

Gross Domestic Product: Wales and the UK

Lord Browne of Ladyton Excerpts

Thursday 6th July 2023 Lords Chamber

[Lord Anderson of Swansea (Lab)]

My Lords—

[Lord Browne of Ladyton (Lab)]

My Lords—

[Baroness Williams of Trafford (Con)]

My Lords, I think that noble Lords need to decide between them which one of them will speak.

--- Later in debate ---

[Baroness Penn (Con)]

The statistics that the noble Baroness refers to are more experimental than the ones that I used in my Answer, but they are being refined all the time and they can be subject to greater volatility due to the smaller size that they represent. However, the Government are delivering on their commitment to replace European funding in Wales. As I set out in my earlier Answer, that is just one of the UK Government’s investments in Wales that recognise its great potential to grow even further.

[Lord Browne of Ladyton (Lab)]

My Lords, talking of figures speaking volumes, the Minister will be aware that last month the annual fraud indicator for the United Kingdom, which of course includes Scotland and Wales as well as England and Northern Ireland, assessed it at £219 billion. Are those fraudulent transactions, the muling of that money and the transfer of it from shell company to shell company, and the export of it in crypto assets, counted as economic activity and therefore aggregated into GDP? When the money comes back into the country to buy houses and land, works of art and other things, is it counted as inward investment?

[Baroness Penn (Con)]

The classification of these matters is for the ONS, and I shall get the ONS to write to the noble Lord.

Energy Profits Levy

Lord Browne of Ladyton Excerpts

Tuesday 9th May 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I disagree with the noble Baroness that there is preferential treatment for the oil and gas sector, which faces a far higher tax rate based on the extraordinary profits it is benefiting from. That is entirely appropriate. On the investment incentive, we will continue to need oil and gas as we transition to net zero. We need to encourage investment into UK oil and gas fields to help meet that demand, and that is something the Government will continue to do.

[Lord Browne of Ladyton (Lab)]

My Lords, in November 2022 the current Chancellor estimated that the levy would raise £40 billion over six years. Six months later, the Treasury’s estimate seems to have gone down to £28 billion. What is responsible for that? Is it by any chance the OBR’s estimate of the increase in oil and gas expenditure by these oil and gas companies, rather than renewables expenditure, which they released alongside the Spring Budget, and the consequential forecast increase in tax relief on those sectors’ windfall tax bills?

[Baroness Penn (Con)]

My Lords, a number of factors affect predicted revenues from the EPL, not least the high degree of volatility that we have seen in commodity prices. I say to the noble Lord that, if we do not have investment allowances in place and if we do not invest in the future of this industry in the UK, there will be less revenue in future coming from UK oil and gas fields to contribute to the Exchequer and our priorities in future.

Tackling Corporate Tax Avoidance: EAC Report

Lord Browne of Ladyton Excerpts

Wednesday 30th October 2013 Lords Chamber

[Lord Browne of Ladyton (Lab)]

My Lords, it is a genuine pleasure to speak after the noble Lord, Lord Lawson of Blaby, and not just because I rise while the sense of the Government getting a bit of a drubbing is still in the air—although I am not unhappy about that. The noble Lord’s robust, challenging interrogation of the Government’s position did the House a service beyond just making life difficult for the Government. I apologise to the Minister for glorying in that a little. The noble Lord shared with us some common sense, straightforward arguments based on his extensive experience that made many points with which I agree much more understandable to me than they were before I rose to speak.

I look at the list of those who have chosen to speak in this debate. Excluding those who speak from the Front Benches, I see that there is an unwise minority of us who are not members of the distinguished Select Committee. As I am the first of that unwise minority to speak, it falls to me to thank the noble Lord, Lord MacGregor of Pulham Market, and his committee for the service that they have provided to the House not only in taking on this short inquiry but in producing such a readable, comprehensive and accessible report in an area of great complexity. The committee has produced a series of serious, simple recommendations. I join the noble Lord, Lord MacGregor, my noble friend Lord McFall and the noble Lords, Lord Smith of Clifton and Lord Lawson, in expressing regret and disappointment that the Government’s response was so self-congratulatory. It was not just disappointing but complacent.

I intend to devote a significant amount of my short contribution to expanding on the argument, which has already been made, about whether the Government are entitled to any degree of complacency or self-congratulation in this area. There is significant and recent evidence provided through the witness examination of the Public Accounts Committee that there is no room for complacency or self-congratulation, but that the challenges are still significant and growing.

In its report, the committee justifies the whole process in the first phrase of the first sentence of the summary, which states:

“The UK faces a serious problem of avoidance of corporation tax”.

The last sentence of that paragraph states:

“This damages the economy and undermines trust in the tax system”.

I know from previous debates that the Minister shares the view that that is a serious and significant challenge. That view has gone well beyond those who are in the know about the detail of what happens in the Treasury or in her Majesty’s Revenue and Customs. The people of the United Kingdom know in spades that we face a serious challenge on that, and there is an expectation that we will respond in a serious manner to those challenges.

When we search for some proxy for describing the nature or the scale of that challenge, in previous debates, we have gone to the tax gap. I now know, although I did not fully appreciate this, that the avoidance of taxation by the methods referred to in this report are not included in the tax gap, but the tax gap is a good proxy indicator of the scale and nature of the challenge.

I last spoke on these issues in your Lordships’ House on 6 June, when we debated a Motion moved by my noble friend Lord Foulkes of Cumnock that this House take note of the economic and social consequences of tax evasion and avoidance. In the Official Report, at col. 1308, the noble Lord, Lord Newby, followed the estimate that we were all using that the tax gap was about £32 billion—not all of which, of course, is avoidance of tax by corporate bodies, and none of which, it would appear, is avoidance of tax by multinationals operating the devices referred to in this helpful report.

It was said to be £32 billion and falling. To test whether the Government’s confidence in what they intend to do to reduce tax avoidance is well-placed, I go to the first answer given by a man by the name of Edward Troup, who is the tax insurance commissioner for Her Majesty’s Revenue and Customs, when he gave evidence before the Public Accounts Committee only this Monday, 28 October, at a hearing of the committee to which the noble Lord, Lord Smith of Clifton, has already referred. The transcript is a veritable mine of useful information to test whether what we are doing as a country to address this issue is having any effect at all, or any measurable effect.

I should say that this is the uncorrected transcript of the oral evidence, and it may be adjusted later, but the very first question put to Mr Troup is about the tax gap. He says that it is £32 billion and falling but that it,

“has gone up from £34 billion on an adjusted basis last year to £35 billion in cash”.

I am not sure whether those two figures are comparable, because I am always conscious of vocabulary, but he says that it has gone up from £34 billion on an adjusted basis last year to £35 billion in cash. Thereafter follows some significant to-ing and fro-ing between the members of the Public Accounts Committee and the witness. That to-ing and fro-ing is calculated to leave everybody utterly confused about how those figures are made up and how reliable they are. What is unequivocal is that the tax gap is going up. That is the evidence that was given only a few months after the Minister who will respond to this debate unfortunately told your Lordships’ House that it was lower than that and going down. That was the best information with which he was provided from the same sources. I understand that because I have been in that position myself. The first proxy for this that we can find indicates that the situation is getting worse, not better.

My first question is: what is the current estimate of the tax gap? Is it £32 billion, the figure which was being deployed in June? Is it £34 billion which was apparently the unadjusted figure for last year? Is it the £35 billion cash figure for this year, and is the gap going up or down?

Secondly, this evidence makes it clear that the tax gap does not include any estimate of the taxation we as a country are being denied by the practices identified in this report, with which we have all become familiar. This is for good reason. As the noble Lord, Lord Lawson, said, this is not illegal. Until the policy and the law change, there is no way of estimating what it is. From page 8 onwards in the transcript of the evidence there were some interesting exchanges between Austin Mitchell, a Member of Parliament, and the same witness. The committee tries to put some scale to the taxation avoided by these processes. The way it does so is interesting. The scale is drawn from information communicated to the SEC in the United States of America by companies discussed before in the debate—Google, Starbucks, others—about the scale and nature of their sales in the United Kingdom. The disparity between the figures is astounding. These companies are telling the United States regulators and others that they are doing billions of pounds’ worth of business in the United Kingdom whereas they are telling Her Majesty’s Revenue and Customs that they are doing at most hundreds of millions of pounds’ worth of trading here.

The most interesting thing about this evidence is that nowhere does there appear to be any estimate of the revenue lost. Nowhere does there appear to be an estimated figure we can put to the nature and scale of this problem. That passage of evidence alone—I shall end on this because I want to do service to this report but I cannot go into all the detail of it—generates an incontrovertible argument for the recommendation of the Select Committee for some method of coherent and appropriate accountability to Parliament. That method should follow the example of the Intelligence and Security Committee. The reason the argument is incontrovertible is that as you follow the evidence you discover that HMRC witnesses cannot give any answers. They cannot answer for policy because apparently they have no involvement in policy. They cannot answer for estimates because their business is collecting the taxation that is due, not estimating. They cannot answer in relation to individual taxpayers’ experience with Her Majesty’s Revenue and Customs because that is confidential. Thus there is no accountability at all.

This is not a question of confidence in the taxation system being bolstered by a process in which there is no accountability. It is an example of confidence in the taxation system we have in this country ebbing away because there is no accountability for it. Rebuilding confidence will require Her Majesty’s Government to realise that transparency, accountability and a shared knowledge of what is going on inside our tax system lie at the heart of the matter. As to what the noble Lord, Lord Lawson, has suggested about restructuring the taxation system, I should have to look at the details carefully, but what is necessary is accountability in Parliament. We, at least, need to know who owes what or who should have been paying what, and we do not.

Taxation: Evasion and Avoidance

Lord Browne of Ladyton Excerpts

Thursday 6th June 2013 Lords Chamber

[Lord Browne of Ladyton]

My Lords, I congratulate my noble friend and my good friend Lord Foulkes of Cumnock on securing this timely and important debate, and on his characteristically robust speech of introduction in which he covered quite a lot of the waterfront. He constantly promised that others would add to it. I am not entirely sure that he has left much room for anybody to add anything, but I shall do my best while trying not to repeat what he has already said in great part.

It is disappointing that so few Members of your Lordships’ House consider this issue important enough to make a contribution to the debate because it is hugely important. The scale is mindboggling in the United Kingdom, as my noble friend has already said. According to Her Majesty’s Revenue and Customs, the tax gap—the difference between what Revenue and Customs believes should have been paid and what it received from the entire economy—amounted to £32 billion in 2011-12. One can disaggregate that, and it is interesting to see that it is not all corporation tax. Quite a substantial part of it is VAT, there is some customs and excise avoidance and a comparatively smaller amount is income tax. It is a significant amount of money. As my noble friend said, it is a third of the deficit for 2012-13. If this money were brought in, it would obviate the necessity for any further spending cuts; it would deal with that issue. While I accept the remonstrations of the noble Lord, Lord Forsyth, that we should be careful not to conflate tax avoidance and tax evasion, I do not think that there are any positive consequences from either of them for our community.

The tax avoidance industry is clearly damaging the interests of developed countries, including our own; there is no question. It is almost certain, however, that the harmful tax practices are an even greater problem for economies in transition and for developing countries. The leader of my party said recently:

“If everyone approaches their tax affairs as some of these companies have approached their tax affairs we wouldn't have a health service, we wouldn’t have an education system”.

Thankfully, everyone does not, but he makes a very important point. This is exactly the case in many of the world’s poorest countries. Because of the way in which businesses approach their tax affairs, many of these countries do not have these basic services that we can continue to sustain. It is estimated that countries in the developing world lose three times more money—three times more—to tax dodging than they receive in aid every year. The estimate is that they lose about £160 billion a year through tax dodging. If that money stayed in those countries, rather than being spirited away to the offshore accounts of multinational companies, it could be transformative. These tax havens—to which I will come back in a moment—are the life support system for that tax dodging, and the plug needs to be pulled on them. They play no useful role in the global economic system.

In 2004—I cannot find any more recent statistics but perhaps the Minister can—half of the world’s trade appeared to pass through tax havens. That is 50% that at some stage passed through a tax haven, even though these jurisdictions contributed then only 3% of the global GDP. Recent ActionAid research—which I believe is the research that my noble friend held in his hand while making his speech—reveals among other things that the taxes lost to Zambia from tax haven transactions from just one United Kingdom Company, Associated British Foods, was a sum 19 times greater than the United Kingdom’s aid to Zambia for hunger—19 times more from the activity of one British company. That would be enough, ActionAid estimated, to send 48,000 Zambian children to school each year. This is a scandal, which needs to be addressed. I will accept the remonstrations of the Minister, which no doubt we will receive, that nothing was done about this for a significant time when we were in power, and we have to live with that. However, we are learning much more about this now and there is much more understanding of the effect of these issues. What is now necessary is collective action, to which we on these Benches and across this House should contribute.

I turn for a minute to the issue of morality. Frankly, I am fed up with being lectured to by chief executives of industry, who tell me that they have some kind of moral duty to minimise taxation. I will address that point in this way. In September 2012, writing in the context of the revelation that the then presidential candidate Mitt Romney revealed—or was forced to reveal—that he had been subject to an income tax rate of “at least 13%” for the previous 10 years, Joseph Stiglitz, the US economist and celebrated professor at Columbia University, wrote on his blog:

“Democracies rely on a spirit of trust and co-operation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme”.

He goes on to say:

“Both alternatives are unacceptable … More broadly, a market economy could not work if every contract had to be enforced through legal action. But trust and co-operation can survive only if there is a belief that the system is fair. Recent research has shown that a belief that the economic system is unfair undermines both co-operation and effort. Yet, increasingly, Americans are coming to believe that their economic system is unfair; and the tax system is emblematic of that sense of injustice”.

In concluding, he wrote that,

“tax avoidance on Romney’s scale undermines belief in the system’s fundamental fairness, and thus weakens the bonds that hold a society together”.

That is my first point about morality—and I rely on Joseph Stiglitz, who put it better than I could.

I have already said that all the economic and social consequences of tax avoidance and tax evasion, which we are debating today, are corrosive, and none of them is positive. Paying tax is one of the fundamental ways in which private and corporate citizens engage with each other and with broader society. Tax revenues are the life blood of that social contract—and, dare I say it, the life-blood of the big society. They are vital to the development and maintenance of physical infrastructure and to sustaining the infrastructure of justice that almost all the people who operate in this system rely on to underpin liberty and their market economy. Why is it, therefore, that tax minimisation through elaborate and frequently aggressive tax avoidance strategies has come to be regarded as one of the prime duties that directors are required to perform on behalf of their shareholders? Why has it been elevated to a moral imperative, when not paying fair taxes is not?

My noble friend made reference to the observations of Sir Roger Carr, the CBI chairman. This man’s views on the issue deeply worry me. He is the representative of British industry. Speaking at the University of Oxford’s Said Business School on 19 May, he said:

“It is only in recent times that tax has become an issue on the public agenda”.

I have to say that I do not know where he has been living, but certainly all my adult life tax has been an issue on the public agenda. He goes on to refer to,

“Starbucks, Google, Amazon—businesses that the general public know and believe they understand”.

I do not understand that part of the sentence. I think he is trying to give an impression that somehow these organisations are a good in themselves and that understanding them somehow means that we like them. We may use them, but I do not have that relationship with those organisations. He continues,

“businesses with a brand that become a perfect political football, the facts difficult to digest; public passions easy to inflame”.

He goes on, in what is clearly a criticism of rhetoric from our Prime Minister. He says that tax avoidance,

“cannot be about morality—there are no absolutes”.

I do not think I need to go much further than that; not many people in your Lordships’ House would not understand why I am disturbed that the man who represents our industry at its very pinnacle holds these views. I would like the opportunity to engage with him about them, but I cannot have that opportunity here. I do not really understand why he feels compelled to make that argument, particularly in the face of the fact that, in January, our Prime Minister said in a speech to the World Economic Forum in Davos:

“Some forms of avoidance have become so aggressive that I think it is right to say these are ethical issues”.

I agree with him. He urged multinational members to wake up and smell the coffee, obviously taking advantage of what was in the public domain.

Not entirely but relatively unusually for me, I am on the side of the Prime Minister on this issue. It is necessary for us to spend some time engaging with the view that has permeated our businesses, at least at one level of representation although not universally, about why they think their obligation is to avoid paying fair taxes and to challenge that directly. I ask the Minister, and I am sure that he will find it easy to answer this, whether he agrees with the Prime Minister or with the chairman of the CBI that this is a moral issue. If it is a moral issue, does the Minister agree that we in the United Kingdom, because of the position that we occupy in the world and our relationship with many of these tax havens, have a moral obligation to engage with them in a way that helps to solve this problem and undermines their activity?

While I am at it, can the Minister give some indication of how the Government intend, in the process of putting pressure on these tax havens—as they are— which I commend, to ensure that we do not replicate the situation that we allowed to happen in the first place? That situation put these communities in the position of finding some way to sustain themselves in the absence of natural resources and opportunities for the economy, which forced them into the hands of clever people who showed them a way of making large amounts of money in a parasitic fashion so that they were not a burden on us. We have to accept that part of this deal must be that we accept our responsibility to ensure that people can live in these places at the standard of living that they have achieved—maybe beyond that, in some cases—which does not rely on them having to perform these functions in the world at such a disproportionate rate in order to keep body and soul together.

I commend to noble Lords the briefing I have in my hands from the co-ordinator of the All-Party Parliamentary Group on Anti-Corruption, and the one that was sent to all of us by Action Aid. These are excellent documents. I cannot, in my last minute, do any of them justice, but they have a list of arguments and questions that go to nub of this issue. If others who speak after me can engage with these issues in the way that these briefings deserve, I commend the briefings to them.

I make one final point to the Minister. There is a deeply corrosive effect of the structures that have been created by tax avoiders and tax evaders which we need to interdict: they have created a set of structures of which the crooks of this world are taking advantage. We discovered recently, because of the uncovering of money-laundering through a legitimate process of international banking in cyberspace, exactly what crooks are able to do. That is exactly what is happening in this environment. If the Minister wants evidence for that, he should look at the World Bank’s recent report, which showed that there were 800 corporations involved in the 150 examples of serious money-laundering and crooked use of money, all of them taking advantage of structures that were otherwise legitimately created. We are allowing crooks and deeply tainted money to get into our legitimate exercises and economy.

Scotland Bill

Lord Browne of Ladyton Excerpts

Wednesday 28th March 2012 Lords Chamber

[Lord Browne of Ladyton]

My Lords, I have immense respect for the noble Lord, Lord Forsyth of Drumlean. I listen carefully to what he says, and I have heard this argument from him on a number of occasions and respect it entirely. I have listened carefully, too, to the arguments put forward by the noble Lord, Lord Lang of Monkton. I thought that his contribution ranged much wider than the actual provision that we are considering, but he made some very important points, which are worthy of being recorded. The noble Lord, Lord Kerr of Kinlochard, rose to debate some of them and made a helpful contribution. The noble Lord, Lord Pearson of Rannoch, read in short—and with respect to him, slightly misleadingly—a part of the Bill to make another point. I hope noble Lords will forgive me, but we have debated these provisions in some detail in different ways. I had my say both at Second Reading and in Committee, and that is all recorded. If people want to know what my views are for supporting this provision and its maintenance in the Bill, they can read them at length.

However, in response to the point made by the noble Lord, Lord Pearson of Rannoch, it can sometimes be deeply misleading to read in short a piece of legislation. I am not intending to read it at length, but the operational way of this Bill is to amend other legislation. I think that the answer to his point—the Minister will be able to correct me when he comes again to the Dispatch Box if I am wrong—lies in the fact that the active verb in the piece that he read to us is to “specify” a tax, not to impose a tax. The answer lies in the words that the noble Lord, Lord Pearson, chose. That, put another way, is the point that the Minister was making to him.

In any event, whether or not this provision generates deep and interesting constitutional issues, we know that where this constitutional imperative resides—in the other place—they have already approved this devolution. The Bill has come to us with their approval. It may be that we can say, with some merit, that they did not pay a lot of regard to this clause. It was a differently numbered clause at the time. However, they will certainly pay a lot of regard to it when it goes back to them, and it will not become law if they do not approve it. The responsibilities that they hold in terms of our constitution, they hold. If they choose to devolve them and encourage us within this Parliament to support that, I do not think it is our privilege to prevent them doing so.

For clarification, we also need to look at the genesis of this provision. It is not entirely true to say that Calman was silent on this point. The Calman commission recommended:

“The Scottish Parliament should be given a power to legislate with the agreement of the UK Parliament to introduce specified new taxes that apply across Scotland”.

The noble Lord, Lord Forsyth of Drumlean, who is comprehensively knowledgeable about Calman and this Bill, and has proven that time and again, will see that this provision goes significantly further than the Calman recommendation. However, it is not true that there is no reference in Calman to the devolution of taxation or the creation of a power of this nature to assist future devolution. There is consideration of it in some detail in the report. The arguments for and against are there, and there was a clear recommendation, but I accept that it has been taken further.

As I said in Committee when this issue was debated at great length, the deletion of this provision would leave the Bill significantly reduced, not only in its constitutional significance but in its significance for the people of Scotland. I am not interested in achieving that objective. Our position is that we support the inclusion of this provision, provided that certain checks are in place. That is why rather than seeking to support the deletion of this provision we have tabled Amendment 16, to which I will speak at greater length in the next group, and which we believe would allay much of the concern over the breadth of this provision, were it to be accepted in some form. This of course all depends on the House’s position in relation to this amendment. I accept that the debate on my amendments is dependent on the decision that the House makes in relation to this amendment. However, I was given a certain assurance by the noble Lord, Lord Forsyth, in his introductory remarks that I need not worry about that, so I will now sit down and prepare to argue the next amendment.

[Lord Pearson of Rannoch]

Before the noble Lord sits down, and with the leave of the House, neither he nor the Minister has answered my main question on this matter: have the people of Scotland given their informed consent to this provision? If they have not done so, will they be invited to do so, perhaps with the provision being specifically flagged up in any eventual referendum?

[Lord Browne of Ladyton]

I might just respond on this point and leave the Minister to deal with the matter if he thinks I have not dealt with it adequately. My response to the noble Lord, Lord Pearson, is that I think I answered his question by pointing out where he was misreading the provision that he himself chose. He now asks another question and I am happy to answer it.

Scotland is a representative democracy, just as the rest of the United Kingdom is. It has two levels of parliamentary democracy: the Scottish Parliament and the UK Parliament. The Scottish Parliament, which speaks for the people of Scotland, and all parties overwhelmingly approve of the provision. I have no doubt that we will see that in the second legislative consent Motion, which I am confident will be passed unanimously by the Scottish Parliament.

[Lord Forsyth of Drumlean]

My Lords—

[Lord Browne of Ladyton]

Perhaps the noble Lord will allow me to finish answering one question before he poses another one. I am asked where the democratic support for this comes from. It comes in the unanimously expressed will of the Scottish Parliament. The noble Lord, Lord Pearson, may not think that sufficient, but I can tell that the people of Scotland think it is.

[Lord Forsyth of Drumlean]

I do not mean this in a cheeky way, but my recollection is that when we discussed this at an earlier stage the noble Lord indicated that he had not appreciated that these powers were quite so wide-ranging. If he, with all his brilliance and his close study of the Bill, did not realise that, surely the noble Lord, Lord Pearson, is right in suspecting that the people of Scotland might not know that these powers were being provided, or indeed the people of England, Wales or Northern Ireland who could be affected by them?

[Lord Browne of Ladyton]

The combination of cheek and flattery is so appealing that I can barely resist it. The noble Lord’s recollection of what I said when we discussed these provisions before is not my recollection, but the Official Report will have recorded it. I think that I said it was not fully appreciated how significant these provisions were—not by me; I thought that I had helped those who had not fully appreciated that, but maybe this was a process of education in which I was a pupil, not the educator.

In any event, I am not suggesting that the significance of this important provision of the Bill is widely known and appreciated by the people of Scotland, whatever that phrase means, but I was asked a different question by the noble Lord, Lord Pearson—where the constitutional democratic support lay for this from the people of Scotland. The noble Lord, Lord Forsyth, will recall that I referred to a representative democracy; I did not suggest that all the people of Scotland understood this.

[Lord Pearson of Rannoch]

I merely say that the record will confirm that the noble Lord has not answered the question that I asked him.

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Moved by

[Lord Browne of Ladyton]

16: Clause 27, page 20, line 24, at end insert—
“(7) The use of an Order in Council under subsection (1) of this section shall be assessed against the following criteria—
(a) the potential for the new tax to create or incentivise economic distortions and arbitrage within the UK;(b) the potential the new tax might create for tax avoidance across the UK;(c) the impact of the proposed tax on compliance burdens across the UK; and(d) the compatibility of the new tax with EU Legislation and Rules, such as those covering State Aid and the Single Market, and the Human Rights Act.(8) In proposing an additional devolved tax under subsection (1) of this section, the Scottish Parliament shall provide evidence in support of the criteria specified under subsection (7), including in particular—
(a) the rationale for the devolution of such a tax;(b) the intended tax base, taxable activity and expected revenue;(c) an assessment of the expected distributional impact, including the impact on business and individuals and the wider economic impact;(d) an assessment of compatibility with the Human Rights Act, EU State Aid rules and other directives;(e) plans for the collection and administration of the tax, including means of ensuring compliance; and(f) an assessment of any interaction of the proposed new Scottish tax with UK-wide taxes, including plans to protect policy and geographical borders.”

[Lord Browne of Ladyton]

My Lords, I beg to move Amendment 16 standing in my name and that of my noble and learned friends. It provides an opportunity for the Minister to make his own contribution to the new-found relationship between the House and the ministerial Front Bench and show that the Government are not only listening but responding positively to positive and helpful amendments that are being tabled to this legislation. We have had two very positive responses on Report today. I think that this is the time for a third positive response, and the Minister has the opportunity to make his own distinct contribution to that.

As I said in a previous debate and as has been apparent in the discussion about Clause 27 thus far, the provisions of the clause are of great significance, constitutionally or otherwise. However, the tenor of the debate in this House, both in Committee and today on Report, demonstrates that it is precisely because of the significance of this provision that there are legitimate concerns over democratic accountability in the exercise of the provision as presently drafted.

In creating the mechanism for the devolution of future taxes to the Scottish Parliament, the Government are providing a stable framework for the continued development of the devolution settlement and, in many ways, for the natural progression of the Calman commission project. It is significant that the commission did not at any point suggest that any new taxation powers should be devolved using the Section 30 order mechanism, which I agree with the Minister could be used for the devolution of taxation. Any of the taxes provided for in the Bill, or indeed any future taxes, could be devolved through a Section 30 order. However, I am not proposing to open a debate about that because, from the way they have chosen to proceed, the Government have clearly come to the view that that is not desirable and that in fact another mechanism should be framed in primary legislation for the devolution of any new or specified taxes. I imagine that the Minister will be able to confirm that that was a deliberate decision as they thought that it would be inappropriate constitutionally to make these significant changes or to allow them using the existing mechanism, and that there needed to be a separate and well understood distinct mechanism for doing so.

For that reason, we on these Benches believe it is important that the conditions which we have debated at some length—I shall not go into the detail of them—and which will be applied to any proposed devolved tax should be clearly understood and set out. Not only do they need to be transparent but the Executive—in the exercise, through Order in Council, of the specification of taxation in the future—needs to be accountable to Parliament. At the very least, there needs to be some mechanism to make the Executive accountable in their future dealings with the Scottish Government against the criteria that the Government themselves set out in the Command Paper, informing how they will exercise this power. Therefore, we support the mechanism but we believe that Parliament should have the right to debate and, if necessary, to amend the criteria to be applied in assessing the convincingness of the case to be made for the devolution of taxation in the future.

In their Command Paper on the Scotland Bill, the Government provided a helpful sketch of the criteria to be applied when considering any future new devolved taxes. However, unless these criteria are placed in the Bill, Members of this House and the other place will have no ability to comment on or amend that list; they will just have to accept it. It is on that consideration that I tabled Amendment 16, which would place in the Bill the list of criteria to be considered for the use of an order to add a new devolved tax, so that Parliament can vote for Clause 27 in the full knowledge of how it will be applied in practice. I imagine that the Minister will not wish to argue with any of the specific criteria listed in the amendment as it transposes verbatim the list in his own Command Paper, so we cannot have a dispute about the criteria. I must assume that if he does disagree, which I hope he does not, his disagreement will lie in an attempt to increase the democratic accountability of the clause.

I am coming to the end of this argument because it is comparatively simple, without going into the detail of it. The Government have given us the makings of a full and properly accountable Clause 27 but they have not brought them together. I recognise that there may be a deficiency in the drafting and that there is an opportunity to take it away and correct it, but all I seek is to bring the two parts of the Government’s thinking together and to put them into a legal framework in such a way that in future—well, actually we can debate now whether these are appropriate criteria or whether they should be augmented or further explained, and if not, we can settle them—we will know transparently that the test has been properly applied.

I am doing this for one other reason, which is very important, too. The Bill will not become active unless there is a legislative consent Motion in the Scottish Parliament. If these criteria are in the Bill, the Scottish Parliament will have to approve them. When the Scottish Parliament has approved them by a legislative consent Motion, which I am confident it will, we will have agreement. We will then have a framework against which to test any future decision we make on whether it complies with the agreement and the Scottish Parliament will know whether the criteria are met. It cannot say in future, “This is a set of criteria that those people in London thought up and imposed on us. They didn’t even have the good grace to put the criteria in the Bill, so they don’t apply to us. We don’t feel ourselves bound by them because they are in your Command Paper and not in ours; whereas, if the criteria are in our agreed legislative framework, we may have a dispute on whether they are met but at least we will know what they are and we will be able to make the argument that you have failed to meet the criteria that you voted for yourselves”.

[Lord Forsyth of Drumlean]

My Lords, I support the amendment. It is not even half a loaf. I hate the procedure but I agree that it is a great improvement for the reasons that the noble Lord put forward—the last one, in particular: that it would make it clear where the boundaries were in the use of this extraordinary open-ended power.

I have not seen my noble friend’s brief, but I am prepared to stick my neck out and make a prediction, which is that he will not accept the amendment. Writing it in the Bill will create the opportunity for judicial challenge, and the Treasury loves being able to decide the rules and not be subject to challenge. I do not think that my noble friend will like the amendment because it will constrain what he seeks, which is for the Treasury to decide what will and will not happen. He underestimates the extent to which there will be a political challenge from north of the border. I accept that this is an advance so I support the noble Lord’s amendment.

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[Lord Sassoon]

My Lords, I take that as a no.

[Lord Browne of Ladyton]

I am not allowed to.

[Lord Sassoon]

Then it was a no for a very good reason.

My Lords, I thank the noble Lord, Lord Browne of Ladyton, and the noble and learned Lords, Lord Davidson of Glen Clova and Lord Boyd of Duncansby, for the amendment, which exposes an important issue that it is quite right that we should debate. As was well anticipated, I say at the outset that it does not find favour. However, in the spirit in which the noble Lord, Lord Browne of Ladyton, led me on, I will be positive in my response, because there is further reassurance to be given here about what I hope your Lordships will think is a pragmatic and proportionate way forward.

I am not sure whether we are talking about Amendment 17 at this point. My noble friend did not speak to Amendment 17, which is a fundamental one about removing the ability of the Scottish Government to legislate on any taxes that are devolved. Perhaps I will not need to say very much about that; it links to our previous discussion.

--- Later in debate ---

[Lord Sassoon]

We are going back to another question. I am answering the question about the empty space that is created. It is easiest to do that by reference to a specific example of where we are creating the space within which the Scottish Parliament will have the ability to create a new tax framework to fill that space. That example is specifically envisaged. By analogy, that is how I anticipate it will work for possible other taxes in the future if they meet a number of thresholds and requirements, legislative and otherwise, including meeting the requirements that we have been discussing in the Command Paper.

[Lord Browne of Ladyton]

My Lords, I am extremely grateful to all noble Lords who have spoken in this debate. I am particularly grateful to the noble Lords, Lord Forsyth of Drumlean and Lord Kerr of Kinlochard, for their comprehensive support, stated commendably briefly, for my amendment. I very much thank the noble Lord, Lord Sanderson of Bowden, and the noble Earl, Lord Caithness, for their specific support for the last argument I made, which is the key perhaps to the future of this amendment.

I am also extremely grateful to the noble and learned Lord, Lord Cameron of Lochbroom, who has made a suggestion that will improve the amendment. I agree with him that the order of the amendment would be more fortuitous the other way around but we may have an opportunity to come back to that. I have to say that I will come back to the noble Lord, Lord Lyell, but I thank him for his intervention about “Monty Python”. He has given me an idea for a peroration, which I think he will appreciate—but he will need to wait for it.

In the way in which the Minister has responded to the debate he has entered into the spirit of the day, but that is where it ends. He has only entered into the spirit of the day; we now need to get the content. The Government are listening and responding to the House’s position on this provision. I think that the Minister gets it and understands the point. Although I was a Treasury Minister for a period, I am not entirely sure where the blockage lies but I am sure that it can be moved.

The Minister says that he has made the arguments and hopes that they are convincing. I have to say that I do not think that he made any arguments on either my first or second points, the first being that it would be better if this extensive provision was ring-fenced by the Government’s own criteria in the Bill for the purposes of accountability, at least for the future. With respect to the Minister, a report—I will have to look carefully at the words he used about how it will work—which is an augmentation of one that is part of the agreement with the Scottish Government for the legislative consent Motion will not do. It will not do for all the reasons that the noble Lord, Lord Kerr, and others identified. Although it may have a degree of prospectiveness about it, the problem is that it would be more likely to be retrospective. However, even if it is prospective, it does not have the element of accountability about it that your Lordships’ House is looking for and the Opposition are looking for.

I could have been convinced by some offer that was more solid than the one that was put to me, but I am not persuaded by that offer. I am wary of the devolved taxation equivalent of an impact assessment report, which I think is what he also offered me. A statement by a Minister saying that these criteria are met will not be enough for this purpose. I am afraid that it will probably come to some Minister, whose bona fides I am not questioning in advance, saying, “The criteria that we set are met by this”, or “I assure the House”, or whatever. That will not quite be enough for this.

Even if I have not, and we cannot, find in this Bill a mechanism that gives the accountability that I—and, I sense, your Lordships’ House—would like to see, the Minister did not address at all the point about how we get the Scottish Parliament and Scottish Government to buy into and own these criteria. Experience tells us that that is essential. Even when they do buy into and own criteria or legislation by legislative consent Motions, they deny it later on, or they say that it was not enough, or they ask for more. That I can live with. We can debate that. That is politics. But we surely need to get the Scottish Government and Scottish Parliament to own the whole of this process. We cannot allow them the deniability of saying, “That was your Command Paper. It’s not got our imprimatur on it. We did not agree to it. What we agreed to is in the Act, so we are not having these London-based criteria imposed on us”. We all know this script. They need to own them. If they want these powers—and they do—then they need to own the whole package. I do not know whether the Minister or any of his colleagues have applied their minds to how to get the Scottish Parliament and Scottish Government to own this package, but there is a very simple way: get them to pass a legislative consent Motion for an Act of Parliament that includes them.

How, therefore, given that I am not convinced by the Minister’s arguments, do I propose that we deal this issue? Members of the House will be relieved to know that I do not intend to divide the House in the afternoon of the day before Recess. I do not intend to do so for this reason: that the Bill has another stage to go and I wish to continue talking to Ministers about this issue. I sense a growing coalition across the House for a revision and amendment of the Bill which could attract wide support and I have not had the opportunity to build that coalition. I am being open. I want an opportunity to try to build a coalition for an amendment that will find favour with your Lordships’ House and have some possibility of being passed.

I make one more offer to the Minister—I do not expect him to respond now—to engage to see whether we can find a way of amending the Bill or of obtaining from the Government a bankable undertaking that is owned by the Government and the Scottish Government. I cannot see what that can possibly be other than this amendment. I shall not be leaving the country during the Recess and I will make myself available for any discussions—if I can, I will bring members of our own Treasury team with me—to see whether we can find a way around this issue and, if we can, I shall be happy to commend it to the House.

[Lord Maclennan of Rogart]

If the noble Lord does not get the response that he is seeking and he is right in divining that others are seeking, then he should not rely on his intuition about coalition around his point. I think he can have the assurance that a number of noble Lords on these Benches are of the same mind as he is.

[Lord Browne of Ladyton]

I am extremely grateful to the noble Lord for his contribution. I know where the key to success in a vote in this House lies: it is on those Benches. I am fortified in my resolve to try to improve this legislation.

The noble and learned Lord, Lord Wallace of Tankerness, will confirm that at all stages of this process I have endeavoured to be constructive and helpful. This provision has to be improved, although not necessarily directly in the way I have proposed. I am happy to be flexible but my suggestion passes my only test: it improves the ability of the Bill to contribute to the betterment of the Scottish people while, at the same time, strengthening the union. It gives us an argument that is owned across the union which we can deploy in the future.

I say to the noble Lord, Lord Lyell, that, as far as the amendment is concerned, this parrot is very much alive; this parrot is not no more and it is not deceased. It may not fly today, but it is very much alive.

I gave the Minister advice about Scottish football on a previous occasion. He scorned it, and he got himself into an argument in the House about Scottish football which he could have avoided. I give him this advice now: do not tempt the noble Lord, Lord Forsyth, to go away and come up with better criteria. I am almost certain that we will return to this issue at Third Reading. I beg leave to withdraw the amendment.

Amendment 16 withdrawn.

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[The Earl of Caithness]

My Lords, I return to the problem that we discussed earlier when we were on Amendment 16. I have read and reread Amendment 29 and wonder whether my noble friend can help me. Where does it tie in the Scottish Executive in the way in which the noble Lord, Lord Browne of Ladyton, mentioned in his amendment, which was supported by my noble friend Lord Sanderson of Bowden and the point that I raised? I listened to my noble friend with great care when he replied on Amendment 16 but I still cannot find the bit in Amendment 29 that will satisfy me.

[Lord Browne of Ladyton]

My Lords, I welcome the amendment. It is entirely consistent with a request that I have made repeatedly for reports on current progress in relation to the transfer of these powers. I hope that in anticipation of Third Reading, Ministers will take some time over the Recess to prepare at least an outline of a report on progress for the transfer of these powers to the Scottish Parliament. I say that for the reasons that I have articulated. I have a belief, based on information that I have received, that the Scottish Government and their Civil Service are ill prepared for the transfer of these powers. I should like to be reassured that we are transferring powers to people who are building the competence to use them appropriately.

In response to the point made and repeated by the noble Earl, Lord Caithness, about the buy-in of Scottish Ministers, there is a reference in subsection (2) of the proposed new clause to an obligation on Scottish Ministers to report in a similar way to the Secretary of State. However, it is deficient in the sense that it does not satisfy the desire on these Benches, which is apparently shared across the House, that the Scottish Government and the Scottish Parliament should buy in more fully to the whole package of transferring taxation powers for the reason that I gave before. I repeat that some time in the future they may be tested against that package and they should own it. That can be done only if they agree. If they do not agree, it will be interesting to hear their explanation, but I suspect that if it is put to them they will find it so impossible to agree that they will agree.

The reports, which we understand from the Government will be used to answer some of the points that I made earlier, do not in their present form answer those points, although I accept entirely what the Minister said about the Government’s intention to augment the reports in the way he suggested. I do not doubt that for a moment, so he should be clear that I accept entirely that that undertaking can be guaranteed to be delivered. I sense that it will not be enough but I do not want to go back to Amendment 16. I welcome the proposed new clause as it stands and as far as it goes, but it does not go far enough.

[Lord McFall of Alcluith]

Under the proposed new clause as far as it goes, I was taken with the Minister’s comment about taxation being an instrument of redistribution, as Calman noted. If that is the case, we need a deeper appreciation of the transfer of these powers. It is not just about money but how that money is spent. There is no association between tax levels and growth. As a Scottish citizen, I want to ensure that money from income tax in Scotland is spent properly and that I will benefit as a result.

As far as concerns subsection (5)(d) of the proposed new clause, it is important that the issue is looked at. As was suggested, Scottish public services are inefficient even by miserable UK standards. The Scottish health service, for example, spends 19 per cent more per person, and we have 30 per cent more doctors, yet in many cases—such as cancer survival levels for women—there are worse outcomes. This is a very important issue. If we are going to look at income tax levels, we should have reports from the Scottish and UK Parliaments to ensure that we spend our money in the proper way—as an instrument of redistribution, as Calman suggested.

--- Later in debate ---

[Lord Browne of Ladyton]

My Lords, I rise to support the amendments to which the noble Lord has spoken, and to speak to the amendments standing in my name and that of my noble and learned friend Lord Boyd of Duncansby. On his behalf, I should first tender his apologies for not being here to speak. Unfortunately, he has commitments that he could not avoid. He would have wanted to be here. He has put a lot of time and investment into this part of the Bill and this issue. He has given me an exhaustive seminar on it and I shall try to do my best to support the amendments which he would otherwise have spoken to.

Could we also offer our congratulations to the noble and learned Lord the Advocate-General for Scotland on achieving this level of agreement and the solution to what was a highly charged political problem in Scotland for a period of time? When it blew up, it was not obvious that it could have been resolved in this way. The extent to which the Minister has found agreement and a resolution to this problem lies in the words of the noble and learned Lord, Lord McCluskey, before he left. He said that he was 98 per cent satisfied.

In all the years I have known him, I cannot imagine the noble and learned Lord being 98 per cent satisfied in relation to almost any argument ever put before him. If he is satisfied to that extent, it is a measure of the achievement of the Minister and his officials. From observing this closely, I know that my noble and learned colleague has put a significant amount of his time and effort into trying to resolve this. I do not intend to speak to any of the amendments that the Minister has spoken to, with the exception of Amendment 52, because the two amendments proposed by the Opposition are attached to their Amendment 52. If noble Lords bear with me, even at this late hour I will try to cover this in a few minutes.

Amendment 52 is a wholly new provision which comes out of the agreement with the Scottish Government, paving the way for the legislative consent Motion. It establishes a review of the new procedures to take place,

“as soon as practicable after the end of three years”.

In principle, we see no difficulty with the concept of a review. It has much to commend it and the Minister set out some of those reasons. However, it is clear from the Written Statement from the Secretary of State, dated 21 March, that the agreement for this review stems from the dispute about whether there should be a requirement for certification of an issue by the High Court as one that raises a point of law of general public importance. Can I say how pleased we are that the Government have resisted the request from the Scottish Government to include certification as part of the package of agreement for the LCM? My noble and learned friend Lord Boyd set out the reasons for our approach in Committee and I do not intend to repeat them here.

More importantly, the clear tenor of the debate in Committee was against certification as a prerequisite for an appeal to the Supreme Court. Those who were present at that debate will recall the cogent and persuasive reasons advanced by the noble and learned Lords, Lord Cullen of Whitekirk and Lord Cameron of Lochbroom, who is in his place today. These were about why such an innovation should not now be made, restricting the right in cases involving the determination of issues of fundamental human rights. Had certification now been included in the agreement it would have been against the wishes of this House.

We appreciate, however, that Scottish Ministers wish to have a commitment to a review of the operation of the new procedures, with the issue of certification being directly addressed in that process. The noble and learned Lord has already alluded to this. If a review is to be meaningful, it must have sufficient evidence to inform it, and it must take into account all sides of the debate. This is where our concerns come in and why we have put down two amendments to Amendment 52.

First, we suggest that the review should be conducted after five years, rather than the three years specified in the amendment. We do not think that three years is long enough for a meaningful review. The Supreme Court took over the jurisdiction of the Judicial Committee of the Privy Council on devolution issues in October 2009. In the approximately two and a half years since then there have been around 12 cases from Scotland. However, seven of those were what have become known as “sons of Cadder”, arising from the case of Cadder on access to a solicitor before a police interview. These seven cases came before the court in two batches as they raised substantially the same issues, so the reality is that of 12 cases, eight arose out of the same issue; namely, access to a lawyer. Our concern is that in conducting a review after only three years there will be insufficient material and an insufficient spread of cases for a proper judgment to be made on the efficacy of the new arrangements. This is a serious issue as the person conducting the review may feel obliged to make findings and recommendations where it would be more prudent to await further information.

Secondly, although this is not in the Bill, the Written Statement made by the Secretary of State states that the review will be chaired by the Lord Justice General, whoever she or he may be at the time. The present Lord Justice General has been making the case for certification on behalf of the Scottish judiciary. We do not, of course, know the identity of the new Lord Justice General, nor do we know what view he or she may form on the evidence. Whoever it is, it seems inevitable that he or she will have been part of the debate on certification among the Scottish judiciary. It is improbable that the new Lord Justice General will not emerge from the existing Scottish judges. Moreover, he or she will have presided over a court whose judgments will have been subject to review by the Supreme Court. His or her opinions may have been overturned and he or she may have been criticised by the Supreme Court in the course of those judgments. This person is then being asked to stand back and conduct an impartial review of the mechanism by which such cases get from his or her court to the Supreme Court. Fundamentally, we do not think this is right. With the best will in the world, even the best jurist will find such a task very difficult and, indeed, may not even welcome such an imposition.

The issue of certification for the Scottish judiciary has arisen out of concerns raised by it about the effect of the Supreme Court on the criminal law in Scotland, and we believe that the new procedures in this Bill go a long way to addressing such concerns. Scottish judges have also seen this as a matter of respect. They point to the fact that in appeals to the Supreme Court from ordinary criminal proceedings from courts in England and Wales and Northern Ireland certification is required from the courts below. They consider that not to require such a certification procedure in appeals from the High Court of Justiciary raises the issue of consistency of approach. However, as the Minister pointed out in Committee, the introduction of certification in the other jurisdictions was, if I remember correctly, to stop what might turn out to be a flood of criminal cases coming from the courts below to the House of Lords. The purpose was wholly different from the issues of respect and consistency that were raised by Scottish judges.

Our amendment addresses these issues. Of course it is right that there should be a senator of the College of Justice intimately involved in the review, but that surely has to be balanced by a view from the Supreme Court itself. That is why we wish to see a commitment that a justice of the Supreme Court will be a member of the review panel to bring the other perspective. I hope that the noble and learned Lord, Lord McCluskey, will forgive me for reporting a private conversation I had with him in the precincts of your Lordships’ Chamber before he left. He suggested, and I agree with him, that it would probably be better if that justice of the Supreme Court was not one of the Scottish justices appointed to the Supreme Court. We on these Benches would very much prefer to see a chairman of the review who had no present involvement with either court, but we know the agreement that has already been reached and, although we think it is wrong, we are prepared to respect it.

I have one question for the Minister, but I hope he will respond to the points that I have raised. I know that he was aware of them in advance because I know there was communication between him and my noble and learned friend. Will the Minister give a commitment that the new Lord Justice General, whoever that might be, will be consulted on whether he or she thinks it is right for him or her to chair this review? If the new Lord Justice General considers that it might be difficult to do that task because of the points that I raised, will the Minister give an assurance that that view will be respected? Will he then work with Scottish Ministers to find a mutually acceptable alternative?

[Lord Cameron of Lochbroom]

My Lords, I pay tribute to the Minister for having listened so obviously to what has been said in all quarters—not least in your Lordships’ House—about these matters. The proposals in these amendments seem entirely reasonable and appropriate, particularly in the light of certain remarks that my noble and learned friend Lord Cullen and I made about the place of the Supreme Court in our judicial system.

Having listened to the noble Lord, Lord Browne of Ladyton, I have sympathy with the view that he has expressed, and indeed the amendment proposed, that the review should be carried out after a longer period than that proposed in Amendment 52. It seems that this is an important review, although apparently not one that will be repeated; therefore, the importance of its conclusions must be based upon a sufficient period to give those conclusions some justifiable basis.

Although the matter of the chairmanship and membership of the review does not appear in the amendment, there is substance in what the noble Lord, Lord Browne, has said about both the chairmanship and the inclusion of one of the Justices of the Supreme Court. I therefore support what he has said in that regard. Otherwise, I pay tribute to the noble and learned Lord for what he has achieved in bringing these amendments forward.