Scottish Consolidated Fund and Loans Fund

Part of Orders of the Day — Scotland Bill – in the House of Commons at 12:00 am on 10 January 1978.

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Photo of Mr John Mackintosh Mr John Mackintosh , Berwick and East Lothian 12:00, 10 January 1978

As far as I know, the mathematics are very much akin to the Goschen formula of eleven eightieths, and the Scottish expenditure and the product of Scottish taxation still bears similar proportions. I do not think it would make a great deal of difference.

When the Secretary of State invited the House to produce an adequate scheme of tax-raising for the Assembly during the Second Reading debate on the Scotland and Wales Bill on 14th December 1976, he invited the House to produce a tax-raising scheme because he said that without it the Bill was unsatisfactory and incomplete. He said that the problem was one of technique and finding a suitable method. What he said was that what we required was a tax which could be operable as a marginal supplement, which could be turned on or off as required. This criterion is clearly met by a reliance on alterations in personal income tax.

My right hon. Friend said that the tax must be cheap to collect in relation to the revenue to be raised. Again, the cost is estimated at the moment as £7 million in relation to the Minister of State's total figure of money raised in Scotland by personal income tax at roughly £1,200 million. That is a small ratio, not much above the administrative cost of raising most other taxes in this country. My right hon. Friend said that the tax should fall on Scotland only and should not be paid directly or indirectly by English taxpayers. That is perfectly met. His fourth condition was that it should be compatible with European Community requirements. That point is met.

The Secretary of State also said that the tax must be broadly based and not restricted to special groups. That is covered by the excise duties and the personal income tax which I have specified. My right hon. Friend added that the tax should not significantly affect the management of the United Kingdom economy and must be politically possible as well as technically practical.

7.15 p.m.

I come, therefore, to the last two points. Is this kind of arrangement technically possible? I have had many interruptions from people who wanted clarification and who have made some valid points. My point is that it is perfectly within the competence of this Government to devise such a scheme if they wanted to do so, if they were prepared to override the Treasury veto on this matter. The fact is that country after country has done this and not merely, as the hon. Member for Edinburgh, Pentlands (Mr. Rifkind) has suggested, with uniform schemes for every section but with different schemes to meet different area needs. Needs can be met in a broad system of allocation which then gives the detailed responsibility for raising and spending money to the local authorities.

When we allocate money to many organisations, we consider their needs and then give them freedom to raise and to spend within their area. That is not an uncommon system in the world and it is certainly possible in Scotland. This type of responsibility is an essential part of devolution. The Government could do that. I would say for the benefit of the hon. Member for Cathcart that what I have talked about is not new taxation in the main; it is existing taxes transferred. When it comes to the small margin downwards, and any other possibilities that might occur to hon. Members, the margin there is about £300 million to £400 million either way.

The serious suggestion that to give such a margin to the Scottish Assembly would destroy the macro-economic management of the Treasury is one of the most grotesque arguments I have ever heard the Treasury produce—and this from a Treasury which can have a shortfall of £5·000 million in one year and £1,000 million in another year. I am glad that at least the Treasury has got off that point.

At a recent meeting of the General Sub-Committee of the Select Committee on Expenditure, Sir Douglas Wass told the Committee that £1,000 million one way or the other did not affect the Treasury's demand management. No one is proposing to give to the Scottish Assembly powers to reduce taxation, or do anything else, by £1,000 million. This is considerably less than that in my original amendment which was ruled out of order. The argument that the macro-economic demand of this country would be devastated by such powers being devolved is rubbish. Other countries, federal countries have these powers given not to one little area but to every part of the country and yet still manage federal demand management. They do so when only 25 per cent. of the gross national product is in their control. We have 40 per cent. of GNP in the control of the Government. There is no argument on the grounds of destroying central Treasury economic management, against the proposal to transfer power to the Scottish Assembly to make a marginal alteration in taxation.

What is central to this is not at issue. It is the will of this House of Commons. I accept that many hon. Members have not got that will. I accept that many are deeply and bitterly opposed to devolution. But those who want the Bill to work have to face the fact that if they want devolution they have to give he Scottish Assembly its own sources of revenue together with the right to alter, to some extent, the rates of taxation. An Assembly with these powers would be responsible to its electorate. Without these powers, the plan is half-baked.