Scotland Bill

Debate between Lord Maclennan of Rogart and Lord Lyell

Thursday 15th March 2012 Lords Chamber

[Lord Lyell]

My noble friend, who has far more experience of finance than I ever will have, mentioned Germany; I used to call it the Federal Republic of Germany. In 1983 I took a course in German at the Berlitz language school. I was given excellent advice on how to pay tax. Your Lordships may have heard me refer to this matter on Second Reading. I will quickly go through it again. For every €100 you paid in tax, the local tax office took €15 of that. For the noble and learned Lord, Lord Davidson, and me, the local tax office would probably be in Forfar or Dundee. The balance of €85 was split, with 50 per cent going to the state, which might be Baden-Wurttemberg, Bavaria or North Rhein-Westphalia, and 42.5 per cent going to the federal budget. My noble friend mentioned 30 per cent. I do not know how much of that would go to his Gemeinde—his local area—how much would go to the state, say Baden-Wurttemberg, and how much would go to the federal system. That is one example of how taxes are distributed.

My noble friend and the noble Lord, Lord Foulkes, are right to suggest giving the Scottish Parliament the power to raise taxes. However, the whole system should be looked at. As my noble friend Lord Forsyth has pointed out, we are planning what I call an asymmetric federal system. I am delighted to warn my noble friend on the Front Bench that we have hardly started to have a proper dig into the matter of who is a Scottish taxpayer. It is rather like a sort of dance that he goes on about; he talks about a close connection as if one is dancing with someone. When we consider who is a Scottish taxpayer, we should be aware that that will affect masses of English people, but we will come to that matter another day. In replying to my noble friend Lord Forsyth, will my noble friend the Minister take on board his idea that this Bill may go through but at least we can look at having a better tax system than that which is planned—certainly in the Bill before us—possibly on the lines of what happens in the Federal Republic of Germany or Switzerland? You can look at how this is done elsewhere, but what is proposed in the Bill is a mishmash that will provide eternal difficulty, eternal grounds for gripe, and screams of, “We are not satisfied”. There will be all this and more. There is a problem, and I hope that when the Minister winds up he can give me some reassurance and take on board the point made by my noble friend Lord Forsyth.

[Lord Maclennan of Rogart]

My Lords, I have listened to this debate with fascination and I agree with the basic view of the noble Lord, Lord Barnett, and my noble friend Lord Forsyth about the injustice and unfairness of the Barnett formula. The aspect of the amendment that I appreciate and support most is the notion of establishing a commission, but it should go wider than one that is charged with the task of looking at only Scottish needs—it should look at the needs of the United Kingdom as a whole. The amendment, in so far as it suggests that the first report should be completed by April 2015, is also sensible.

The general view is that the Barnett formula is unjust. This is becoming the backdrop to consideration of devolution in other parts of the United Kingdom. There is a serious risk that this will turn a large part of our population into a very angry opposition to devolution or any advance in self-government or self-taxation. This is not the right time to decide precisely how far these matters should go. Since the Calman commission reported, there has been a considerable widening of the debate due to the success of the Scottish National Party in the previous Scottish election. It may well be that many who would not have taken seriously what is now called devo-max will now take it more seriously. However these things need to be looked at in the round and I would not go down that line at this time.

What is given out by public funds to all parts of the United Kingdom is a matter for the United Kingdom Government, and they do not need specifically to be empowered in the Bill to base their decisions on a needs assessment. As I understand it, the Barnett formula is not based in statute, and it would be perfectly possible for the Government of the day to advance a change. I say yes to a commission to enable us to make a decision, if appropriate, at the right time. When I say that the decision should be made by us, I mean the Government of the United Kingdom. The postponement of consideration of ways and means—the process for changing the allocation of public funds—has been delayed for too long. We have had all kinds of academic input into this discussion. The committee on which my noble friend Lord Forsyth served was absolutely clear on this, and there has been too much delay in taking this issue seriously and getting down to the small print. Only when we have that nexus of information are we going to be able to make a judgment—against the backdrop of what has been decided about tax—as to what would be the appropriate way to deal with the Scottish question.