Scotland Bill

Part of the debate – in the House of Commons at 4:15 pm on 27th January 2011.

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Photo of William Bain William Bain Shadow Minister (Environment, Food and Rural Affairs) 4:15 pm, 27th January 2011

It is a pleasure to follow my near parliamentary neighbour, my hon. Friend John Robertson. Before I address the substance of the Bill, let me place on record my thanks for the great work done by the previous Government. In particular, I thank my hon. Friends the Members for Rutherglen and Hamilton West (Tom Greatrex)-I thank him in the capacity in which he assisted that Government- and for Glasgow North (Ann McKechin), and my right hon. Friend Mr Murphy, along with those Members from other parties who took part in the Calman process and the leaders of the parties in Scotland. A great deal of thanks for the impetus behind the Bill, as for the original Scotland Bill, should go to Wendy Alexander. It is important that we should thank her from the Labour Benches in this debate for her great efforts on devolution.

The key principle of the constitutional reforms that were adopted by the previous Government was cross-party support. As my hon. Friend the Member for Glasgow North stated, there is a real contrast between the great cross-party consensus that has been achieved in the preparation and discussion of this Bill, and some of the frankly gerrymandered changes that we have seen in the Parliamentary Voting System and Constituencies Bill and the Fixed-term Parliaments Bill. I hope that right hon. and hon. Members on the Government Benches will recognise that when they bring forward further constitutional legislation in this Session, such as the House of Lords Reform Bill.

This Bill is good for Scotland, and that is why Labour Members will support it. As paragraph 2.34 of the Calman report states:

"the Scottish Parliament controls 60% of identifiable public spending in Scotland," but is directly responsible for

"only 10% of the taxation levied in Scotland."

If the Bill is passed, thankfully that will change. The Bill will increase the level of taxes levied in Scotland to 35%, which is comparable to the level in devolved legislatures in Belgium, Italy, Spain and Australia. Added to that, the Bill provides for welcome revenue and capital borrowing powers, which will extend borrowing from £500 million a year, under the Scotland Act 1998, to £2.2 billion. That will release proceeds for much needed capital projects in Scotland, such as a Glasgow airport rail link-a matter on which I have spoken a great deal in the past and on which I will continue to speak-and will raise the opportunity for investment in high-speed rail track between the major cities of Scotland and the Scottish border. That will be a helpful economic lever for Scotland. Added to that, the detail of the tax powers will see a variation of plus or minus 10% from 2016, and the welcome devolution of stamp duty land tax and landfill tax.

I welcome the fact that income tax is the principal lever being used to give the Scottish Parliament extra fiscal powers. Giving evidence to the Scottish Parliament on 18 January, Sir Kenneth Calman set out an important principle for where our economy should be going:

"If you change the financial levers, that in itself will not change anything; what you...need is to have in place the right policies."

That is right. Speaking about those levers, Professor François Vaillancourt of Montreal university, also giving evidence on 18 January, said:

"I believe that the instrument that has been chosen, personal income tax, is the best one for the purpose. Corporate income tax is difficult to administer at a personal level, because of tax shifting between various jurisdictions...Personal income tax allows people to see a relationship between what they pay and what they get, and it is linked to the responsibilities of the Scottish Parliament, such as education, social services, health, long-term care and so forth. It is, therefore, an appropriate tool."

I agree.

What we have also seen in the last two weeks is a real weakening of the argument for fiscal independence as propounded by some Scottish National party Members. Professor Muscatelli, whom I believe my hon. Friend Graeme Morrice has already referred to, makes it clear that the Bill does not seek to adopt some of the more volatile taxes, such as corporation tax and other taxes that would inject more risk into the Parliament's revenues. He expressed the view at Holyrood on 18 January:

"Income tax has less impact in terms of tax spillover or tax competition, so it is the obvious place to start."

Again, this is someone who speaks with real expertise, so the House would do well to take note of his views.

Some issues will have to be scrutinised closely as the Bill progresses, particularly if it receives Second Reading and proceeds into Committee. It will be important to probe the precise detail of the definition of "a Scottish taxpayer" and to deal with some issues that my hon. Friends and Government Members raised earlier.

It is important to emphasise the issue of having proper economic forecasting in Scotland. Given the frankly lamentable performance we have seen from the Scottish Government and their ill-starred cast of economic advisers put together by the First Minister, we need a proper and robust system for forecasting growth and the impact of increases or reductions in income tax that the Bill, if enacted, will permit. I was impressed by the idea set out by the Scottish Council for Development and Industry when I went to meet it in central Glasgow last week. It recommended the establishment of a Scottish office for budget responsibility-a devolved office that would examine the effect of devolved Government policies on growth and would be able properly to forecast and stress test the impact of varying income tax, up or down, which I think is an idea with many attractions. I hope the House will be able to explore it further in Committee.

As my hon. Friend the Member for Glasgow North West mentioned, it is important for the Scottish Parliament to make the most of the totality of powers it has from the Scotland Act 1998, which it will still have if the Bill is passed. That must mean a real emphasis on growth. It is true that the income tax-varying power in itself will not necessarily produce additional growth, but it will be a tool, allied with investment in capital projects and skills and with diversifying the Scottish economy by providing more manufacturing and more help for construction, which the stamp duty tax might afford. All these are important if we are to avoid seeing the gap in employment and growth in Scotland widen in comparison with the UK as a whole over the last couple of years.

This is a good Bill, but by no means a perfect Bill. We shall scrutinise it closely if it reaches Committee, but it has the support of my constituents and it will have the support of all the key political parties that are in favour of a decent and decentralised system of government within the United Kingdom.