Third Reading

Part of Scotland Bill – in the House of Lords at 3:30 pm on 24th April 2012.

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Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative 3:30 pm, 24th April 2012

My Lords, I am not terribly keen on this Bill, but I do think it is appropriate that it should say on the tin what is contained in the Bill. The title "Scotland Bill" is somewhat bland, replicates the previous Scotland Bill and gives no indication whatever as to what it is about. I was struck the other day-in the way that one is struck when reading the Sunday papers in Scotland-to read an article by the shadow Secretary of State for Scotland in the other place, Margaret Curran, in which she said that it was ridiculous that no one in Scotland had acknowledged how much was in the Scotland Bill. She also said that although the Scottish Parliament had finally given-what a surprise-its legislative consent to a Bill that was actually enormous in terms of its implications and the powers it transferred to the Scottish Parliament, no one had gone out and explained to people how much was contained in the Bill.

I come from a slightly different side of this argument, but I entirely agree that it is a matter of extraordinary surprise to me that the Scottish media and the Scottish people seem to be completely ignorant of what is contained in the Bill. What my amendments-I am also happy to move Amendment 11-do is change the title from the "Scotland Act" to the "Scottish Income Tax, Enabling of Scottish Taxation and Borrowing, and Miscellaneous Provisions (Scotland) Act". It is a modest proposal. It meets all the rules in terms of Bill titles, and I am sure that in the way that my noble and learned friend has shown such generosity of spirit in respect of caravans and the speed with which they travel on our roads, he will not have the slightest difficulty in accepting the amendment because it will help Margaret Curran and others who believe that by appeasing nationalism we will avert the catastrophe of the balkanisation of Britain and the break-up of the United Kingdom. It will help them to show just what has been achieved, and it may also warn the electorate of what it is about to face. Nothing in all the discussions that we have had on the Bill and all the amendments has really changed the potential damage that the Bill could do.

The provisions in respect of Scottish taxation need to be highlighted in the Title. In order to increase expenditure by 8.5 per cent, the Scottish Parliament will need to increase the basic rate of income tax by 25 per cent. We are back with the poll tax and local government capping where, in order to achieve comparatively small increases in revenue, very large increases in taxation are required because of the gearing effects. Despite my best efforts and those of a number of other noble Lords, the coalition Government have refused to have any kind of referendum procedure or lock on the use of these powers. At the very least, we ought to make it clear that the Bill is introducing for the first time since 1707 a separate Scottish income tax which can be set at any level and where the revenue from it, relative to the baseline expenditure of the Scottish Parliament, is such that very large increases in tax will be required to achieve comparatively small increases in expenditure.

It is also important that the Title lets people know that the really big issues arising from devolution and the instability created by the creation of the Scottish Parliament without addressing the West Lothian question or the Barnett formula-I am sorry that the noble Lord, Lord Barnett, a man who has been forced to travel through life bearing the burden of a formula named after him with which he profoundly disagrees, is not in his place-have not been addressed. There is the whole issue of moving to a needs-based system of funding before introducing a taxation plan. None of those things is included in the Bill. Therefore, to call it the Scotland Bill is misleading because it is clearly not dealing with the key issues arising for Scotland as a whole; it is concerned mainly with tax.

I resisted the temptation to table any further amendments. I regret that my noble friend Lord Sassoon is not in his place. I received a copy of a letter which he sent to the noble Lord, Lord Browne, concerned with those sections of the Bill which create the extraordinary power for this Parliament by Order in Council to create new taxes thought up by the Scottish Government. That is a huge, monstrous constitutional step, but these days they come along every day. We have to deal with them, not least in our domestic environment in this House. A huge constitutional innovation is being made.

My noble friend Lord Sassoon sent me the copy of the letter. I saw it just after the deadline to table amendments, which is probably just as well, because I might have been tempted. I can only assume that the people who drafted the letter in the Treasury were the same people who thought that they could change the tax regime for charities and that it would go through without any difficulty. In the letter, my noble friend says that there is nothing to worry about in respect of the exercise of these powers because the Treasury will have a code, a set of criteria as to what taxes Mr Alex Salmond and the Scottish Parliament can ask this House and the other place to pass on a secondary legislative procedure. That is startling in its naivety. It will mean that from the moment the Bill receives Royal Assent, which is before any referendum campaign on independence, the Scottish Parliament and its First Minister will be able to exploit its provisions to create mischief. If the Scottish Parliament decided that it wanted a window tax or something even more disastrous-perhaps a tax on salmon fishing or estates owned by landlords who are not resident in Scotland, or to introduce a local income tax or any other kind of tax-the notion that the Treasury would be able to say, "Actually, it doesn't meet the relevant criteria so we're not going to put those measures through on secondary legislation in both Houses", is startling in its political naivety and opens up a whole new area of conflict between Westminster and Edinburgh in the area of taxation which should not arise.

Therefore, at the very least we should make it clear in the Title of the Bill that it is enabling of Scottish taxation. That is very important because the tax powers that the Scottish Parliament enjoys-the variable rate and the limited ability to change only the basic rate of income tax by 3 pence in the pound-are abolished by this Bill. What people voted for in a referendum is being abolished. The Government have repeatedly refused to allow a referendum to bring in these new additional sweeping powers. At this late stage, exhausted by my efforts, I plead with my noble and learned friend at the very least to put in the Title of the Bill some indication of what he is about to explode unexpectedly on the hard-working people of Scotland. There is an issue here because the Bill also provides for additional borrowing powers, and borrowing is simply tax deferred. Therefore, Scotland's yet unborn will have to pay higher taxes on the back of these borrowing powers.

I know that people say, "Ah well, these are only powers. They may not be used", but anybody who has read Alex Salmond's manifesto will know that the chances of these powers not being used are pretty remote. They are about as great as the Deputy Prime Minister deciding that he is not going to put Lords reform in the Queen's Speech. It would require a damascene conversion and a huge change, and it is not going to happen. To be fair to the First Minister, the numbers are against him. The Chancellor gave the Scottish Parliament a free ride in the run-up to the Scottish elections-which shows how generous of spirit he is-meaning that it did not have to make any reductions in expenditure to deal with the budget deficit. That has meant that in year two it has had to make two years' worth of reductions.

Alex Salmond is making all kinds of additional promises. If the noble Lord, Lord Barnett, gets his way and Scotland is funded on a needs basis, according to Professor Bell at Stirling University the Scottish block budget will be reduced by £4.5 billion. As it happens, on current yield, the entire product of Scottish income tax which can be raised on this 10p rate comes to the same amount-£4.5 billion. Therefore, if Scotland were funded on the same basis as the rest of the United Kingdom and if the gap were made up by increasing taxation, you would have to double the basic rate of income tax. That might make Alex Salmond a bit unpopular at the polls and he might lose the election, but I suspect that he will make use of these arguments and point to the inequity of the Bill. The Bill provides a means of funding on too narrow a tax base. I agree with Alex Salmond and the nationalists when they say that you cannot fund a country on that basis. If you are going to go down this road, you need to broaden the tax base available to Scotland.

In short, in the brilliant image put forward by my noble friend Lord Lang, this Bill is a Trojan horse. It creates further instability and will not be the last word. It is another step down the slippery slope. When I was Scottish Secretary, my shadow, George Robertson-now the noble Lord, Lord Robertson of Port Ellen-issued the immortal judgment that devolution would kill nationalism stone dead. I am sorry that he is not here to enjoy his triumph as we take yet another step down this road of appeasing nationalism, which in my view will simply add to more and more demands for powers. On this new journey on which we are embarking, the case for additional taxation powers will be valid because of the very narrowness of the tax debate.

I am just thinking of the arguments that my noble and learned friend might use against this amendment. I guess he will say that there are important changes to the judicial system and important other changes. The ones that Mrs McTavish will notice when the Bill is enacted and when the powers are available to the Scottish Parliament are the ones that will hit people in their pockets. It is a foolish measure and one that, like devolution itself, will disadvantage Scotland in the long run. Prior to devolution, Scotland had a voice at the centre of government and was able to influence affairs as they affected Scotland. Now we have the Prime Minister and the First Minister meeting occasionally under a picture of constituencies showing how many had been won by the SNP.

We used to have a system in which the Secretary of State for Scotland was able to see the Prime Minister three or four times a week and be involved in all key committees. I do not seek to re-engage in that whole debate, but we have lost influence. We have had the advantage, in a way that the Germans do not understand with regard to Greece and other countries in the European Union, of having a system of fiscal transfers within one unitary state. This is unravelling it, and it is a great mistake. At the very least, there should be a warning on the tin and my noble and learned friend should accept my amendment. I beg to move.