Taxation

Oral Answers to Questions — Scotland – in the House of Commons at 2:30 pm on 27th March 2007.

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Photo of John Robertson John Robertson PPS (Dr Kim Howells, Minister of State), Foreign & Commonwealth Office 2:30 pm, 27th March 2007

What discussions he has had on the effects of levels of taxation on Scotland.

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

I hold regular discussions with Cabinet colleagues and members of the business community on a range of matters, including fiscal matters. As part of the United Kingdom, Scotland continues to benefit from this Government's management of the economy, which has delivered stability, low inflation, low interest rates and high employment.

Photo of John Robertson John Robertson PPS (Dr Kim Howells, Minister of State), Foreign & Commonwealth Office

Does my right hon. Friend agree with Sir Peter Burt of the Burt commission that replacing council tax with a local income tax would be impractical, and that setting up a nationally set tax would cost the Executive £19 million and employers £60 million, and that it would have annual running costs as high as £55 million? If so, will he ensure that such a rise does not happen for Scotland or the Scottish people?

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

Sir Peter Burt makes a powerful case. It would be very difficult for people to explain, whether at Westminster or from Holyrood, why it would be in Scotland's interest to become the highest taxed part of the United Kingdom. A recent success of devolved government is the reversal of the brain drain and an historic turnaround in the demographic challenge that we faced in Scotland. It is for others who want to make Scotland the highest taxed part of the United Kingdom to try to make sense of that policy, in the context of the real successes that are being enjoyed at the moment.

Photo of Alex Salmond Alex Salmond Parliamentary Leader (Westminster), Leader, Scottish National Party

Given that the great Budget "tax cut" con trick has been well and truly exposed, the Red Book shows that oil revenues are rising, not falling as claimed by the Chancellor, and the Labour party has committed itself not just to keeping but to revaluing the hated council tax, causing misery to hundreds of thousands of Scottish families, is it any wonder that Cabinet Ministers cannot even remember the name of the First Minister, and that the First Minister has taken to calling the Secretary of State rude names in French? Who is responsible —[ Interruption. ]

Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

Order. The hon. Gentleman must take his seat. I do not see what the First Minister has to do with his question. It should be a bit more specific, and he must keep it tight. Just a few more words—nothing more.

Photo of Alex Salmond Alex Salmond Parliamentary Leader (Westminster), Leader, Scottish National Party

Who is responsible for the taxation position, and the shambles and negativity in the Labour Cabinet [ Interruption. ]

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

The second intervention was no more worthy of the hon. Gentleman than the first, Mr. Speaker. As for tax con tricks, I am concerned about the suggestion by the Scottish National party that a 3p rise in income tax would be adequate to cover the large financial hole in its income tax proposals. The fact is that it is not the Government's policy to saddle every Scottish family with an additional tax bill of £5,000. It is not our policy to make the Scottish part of the United Kingdom the highest taxed part of the UK; that is the policy of the SNP.

Photo of Mark Lazarowicz Mark Lazarowicz Labour, Edinburgh North and Leith

My right hon. Friend will be aware that the consequences of 6p on income tax would be particularly severe in areas where incomes are higher than the Scottish average. Will he consider making an assessment of the impact of local income tax on different parts of Scotland so that we can see the full damage for ourselves?

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

My hon. Friend makes an important point. It is the SNP whose sums do not add up, not the Government's figures. I would simply say that the dividing line is now clearer than ever: it is a 2p cut in the basic rate with the Government, or a 3p—or, indeed, 6p—rise with the Scottish National party.

Photo of Jo Swinson Jo Swinson Shadow Minister (Women and Equality), Shadow Secretary of State for Scotland, Liberal Democrat Spokesperson (Scotland), Liberal Democrat Spokesperson (Women and Equality)

One in five Scots will be hit by tax rises under the Chancellor's latest Budget—that is 1 million Scots who are already on low incomes. He has proposed increased tax credits to compensate, but take-up among some groups is as low as 20 per cent. How can the Government pretend to create a fairer tax system when the reality is that the Chancellor is acting like Robin Hood in reverse?

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

With respect, in the middle of a debate about figures adding up, I am not sure that the Liberal Democrats are the most authoritative source. If the hon. Lady seriously wishes to address the issue of child poverty, she will welcome the child benefit rise to £20 a week. Child benefit was £575 a year in 1997, but by 2010 it will be more than £1,000. Before asking her next question, perhaps she should look at the Institute of Fiscal Studies report on the Budget, which stated that when those changes in the tax system and the tax credits system are taken into account, the poorest 20 per cent. will benefit most from the Budget.

Photo of David Marshall David Marshall Labour, Glasgow East

Does my right hon. Friend agree that quite apart from the substantial damage that would be done to the people of Scotland by any proposal to increase income tax by 3p, or to introduce a local income tax, such measures are totally unworkable except at tremendous cost? Does he further agree that they would also require the agreement of the Westminster Departments that would have to collect any such taxes?

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

Of course, some people advocate a position called fiscal autonomy. For example, Crawford Beveridge argues that there should be a shift in the tax powers. Indeed that individual has been quoted a number of times by several Members, so it would be helpful for people to understand the consequences of such a change. On 29 October, Crawford Beveridge stated:

"I advocate the policy that Scotland should raise the money it spends. I know that could potentially plunge the place into recession, because it is unlikely that the total tax take would be as much as Scotland currently receives under the Barnett formula."

With friends like that, no wonder those people cannot make their figures add up.

Photo of David Mundell David Mundell Shadow Secretary of State for Scotland

Although I might agree with the Secretary of State about the disastrous impact that the SNP's 3p tax rise might have, did he really think that anyone in Scotland would not see through a Budget that gave with one hand and took with the other? What does he have to say to people about that?

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

First, may I say what a pleasure it is to welcome the hon. Gentleman to the House—not least because when he has important contributions to make to public debate in Scotland, he is so often busy with constituency events? None the less, the statement he has just offered us evidences the point that he made in his previous work as an MSP, when he stated that there was a "simple lack of thinkers" on the Scottish Conservative Benches.

On the hon. Gentleman's substantive point about the changes in both income tax and corporation tax, I would have hoped that he would welcome the cut in corporation tax and the cut in the basic rate of income tax. If, as part of the new modern Conservative party, he is seriously concerned with the distributional effects, I again refer him to the Institute for Fiscal Studies, which said that the poorest 20 per cent. would benefit most from the Budget.

Photo of David Mundell David Mundell Shadow Secretary of State for Scotland

At least I know the names of my colleagues in Scotland. The Secretary of State is as complacent about poverty in Scotland as he appears to be about the Scottish election campaign, which he is allegedly running. Is he aware that figures released today by the Department for Work and Pensions show that child poverty is increasing, inequality is rising, and the incomes of the poorest fifth are in decline? Is it any wonder that the people of Scotland are so determined to get rid of Labour in May?

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

The reason why the hon. Gentleman knows the names of his colleagues is that they are all calling for his resignation. Frankly, with a question like that, is it any wonder that he is the only person in history—as far as I am aware—to be rejected as a parliamentary candidate by the Liberal Democrats? The fact is that over the past 10 years child poverty has fallen more rapidly in the United Kingdom than anywhere else in Europe, and child poverty is falling more rapidly in Scotland than in any other part of the UK. Of course there is work to be done, but the party that can be trusted to take it forward is Labour, not the Opposition.

Photo of Brian H Donohoe Brian H Donohoe Labour, Central Ayrshire

Does my right hon. Friend agree that when we are trying to attract new talent to Scotland because of skills shortages, to have the highest taxation in the UK would not be appropriate?

Photo of Douglas Alexander Douglas Alexander The Secretary of State for Scotland, The Secretary of State for Transport

Yes. Perhaps unusually, I find myself in complete agreement with my hon. Friend.