Section 28 — Charges for goods and services

Water Industry (Scotland) Bill: Stage 3 – in the Scottish Parliament at 10:15 am on 14th February 2002.

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Photo of George Reid George Reid Scottish National Party 10:15 am, 14th February 2002

We move to the fifth group of amendments, entitled "Charges schemes—general". We are about 10 minutes ahead of schedule. The next amendment for debate is amendment 97, in the name of Tommy Sheridan, which is grouped with amendments 25, 98, 101 and 26.

Photo of Tommy Sheridan Tommy Sheridan SSP

Amendments 97 and 98 should be a core priority of Parliament. Social justice in theory improves no one's standard of living. However, amendments 97 and 98 would deliver social justice in practice.

The current water charging system is quite simply unfair, as it is based on council tax bands. All objective observers, including such bodies as the Institute of Fiscal Studies, agree that the council tax is unfair and regressive, as it commands a higher proportion of income from the poor than from the wealthy. The low-paid and pensioners are particularly penalised by the council tax system, while the well-paid and wealthy are pampered by it.

The effects of applying the council tax bands to water charges are even worse. There is a poor council tax rebate system, but there is no such system for water charges. The system proposed by the Scottish Executive would make no concrete difference to that situation. The poor, pensioners and the low-paid are penalised even more under the current water rates system than under the council tax. In Glasgow alone, 57,000 pensioners are entitled to either full or partial council tax rebate, but to no rebate on water charges.

Members may be aware that, since 1996, water charges for domestic customers have increased by 105 per cent—a massive hike. A further increase of 10 per cent is expected this year. Those increases have been borne by those on fixed and low incomes: people on benefits, state pensions and low wages. The new charging system proposed under amendments 97 and 98 is based on personal income. It would be fair, transparent and progressive. It would deliver social justice, rather than talking about it.

Almost 80 per cent of Scottish pensioners currently live on incomes of less than £10,000 per year. The Office of Water Services in England and Wales estimates that by 2003-04 single pensioner households will pay 14 per cent of their income in water charges alone. Observers expect that the percentage in Scotland will be similar or even higher. In Scotland 882,000 citizens are trying to survive on an income of less than £10,000 per year. The demographic trend in Scotland is towards much smaller households. By 2003-04, it is expected that only 5 per cent of households will contain more than three working adults. At the moment, 80 per cent of households contain only two working adults.

The Inland Revenue would collect the water tax under contract to Scottish Water. The estimated cost of collection would be £20 million per annum. Currently it costs £45 million per annum to collect water charges. Someone with an income of £17,500 per year—the Scottish average—would pay £121 a year in water tax. A two-adult household on average income would pay £242 a year. In Glasgow, such households currently pay £260 a year. In the east of Scotland they currently pay £270, while in the north of Scotland they currently pay £330.

Amendment 97 seeks to protect the poor, pensioners and the low-paid, and to effect a redistribution of income in our country. It is trying to charge appropriately for an essential service—not a service that should be paid for according to use, but an essential service. The proposed scheme recognises the essential nature of water and sewerage services. The amendment would increase the disposable income of the poorest, while ensuring that the wealthy pay more. It would also deliver an extra £201 million this year for water and sewerage investment. Given that incomes rise year on year, that amount is bound to increase.

I move amendment 97.

Photo of Allan Wilson Allan Wilson Labour

Amendment 25 is consequential on the addition of section 34A to the bill at stage 2. Section 34A defines the meaning of the term "occupier" for the purposes of determining who is liable to pay water and sewerage charges. Amendment 25 would add the new section to the list of matters that are to be taken into account when fixing charges under section 28 of the bill.

Amendment 26 is a minor, tidying-up amendment. It would remove the reference at section 36 of the bill to section 13 of the Modifications of Sewerage (Scotland) Act 1968. The bill would repeal section 13 of the 1968 act, as under a single water authority it is no longer required.

I turn now to amendments 97, 98 and 101. Members will be aware that over the past three months we have debated exhaustively Tommy Sheridan's ideas for water charges—which might be described more appropriately as a proposal for a water tax. The issue was raised at the stage 1 debate on the bill, when I listened intently to what the member had to say at length about his proposed scheme. The Transport and the Environment Committee did the same at stage 2. Since then, there has been a 30-minute debate in the chamber on the topic.

I am not sure that I have anything new to say on the subject, other than to state the obvious. Amendments 97, 98 and 101 would scrap the current arrangement under which local authorities collect water and sewerage charges, replacing it with a requirement on Scottish Water to take a specified proportion of a customer's income as payment for the services that it provides. That would require Scottish Water to establish each customer's income. As we made clear at stage 2, such an approach would be incredibly cumbersome and would require a great deal of time, effort and, undoubtedly, expense.

Photo of Dennis Canavan Dennis Canavan Independent

Why would it be so difficult, given that the Inland Revenue already has the required information?

Photo of Allan Wilson Allan Wilson Labour

I have been in correspondence with Tommy Sheridan, and estimates of the costs of implementing the scheme vary. I believe that he himself calculates a collection charge of approximately £40 million per annum. There would undoubtedly be costs to the water company associated with Tommy Sheridan's proposed scheme.

The advantage of the current link between water charges and council tax bands is that the bandings, once established, remain constant. Tommy Sheridan's proposed scheme would lack that advantage. Instead, there would need to be constant revision of a customer income database, which is unproductive in cost and effort. As Tommy Sheridan knows, I cannot see how his scheme would work in practice.

No less significantly, the amendments would require Scottish Water to act in a highly intrusive manner in respect of its customers' income. The authority would not have information about its customers' income. Dennis Canavan suggested that the Inland Revenue already has the relevant information. However, giving the authority power to obtain that information would raise serious questions about individuals' rights to privacy in matters such as their income. Scottish Water would require such information in order to implement a practical charging scheme based on the system that Mr Sheridan proposes. For all those reasons and many more besides, I ask the Parliament to reject amendments 97, 98 and 101.

Photo of John Scott John Scott Conservative 10:30 am, 14th February 2002

I say to Mr Sheridan that the argument for progressive taxation has not been well made at either stage 2 or stage 3. It might be an admirable socialist principle and what we would expect from Tommy Sheridan, but the tax that he suggests would encourage high earners to move elsewhere. This week, I was at a conference at which the Minister for Enterprise, Transport and Lifelong Learning said that she was trying to bring in more people to create jobs in Scotland and generate business and wealth for the Scottish economy. The imposition of a progressive tax would drive those people and their businesses, on which we must depend, from Scotland.

The tax that is being suggested is not equitable. Quite simply, the proposals are impractical. We cannot support amendment 97.

If we accept amendment 98, we must also accept amendment 101, but we cannot accept either because, as Allan Wilson said, that would mean that we would be unable to collect any charges. The proposals could not work.

Photo of Bruce Crawford Bruce Crawford Scottish National Party

I start with what John Scott said. We have known for a long time that the Tories do not like progressive taxation, but we do. I was quite astonished by his comment about people leaving the country because of high taxation. He should acknowledge the number of young people leaving our country because they do not have decent jobs or opportunities and because the economy is struggling. That is happening day in, day out.

I realise that Tommy Sheridan is trying to produce a progressive scheme, but it is stepped. It might have anomalies and it should be tapered. Tommy Sheridan will concede that, on 16 January, he said that work needed to be done on the matter. He said:

"University of Paisley staff will produce a full academic report within two months."—[Official Report, Transport and the Environment Committee, 16 January 2002; c 2593.]

We have to make the legislation today and I do not have enough information in front of me to make a solid judgment about whether amendment 97 would be a proper way to produce such a scheme. Tommy Sheridan's proposal might work if we had a local income tax-based system, but we do not have that at the moment.

Regardless of that, there is no question but that the Executive must address the cost of water as a priority. The low-paid, pensioners and the poor must find their position vastly improved. That is particularly true given some of the increases in the East of Scotland Water and West of Scotland Water areas of late. We have already argued that such increases were unnecessary.

I am absolutely astonished that the minister has not told us today about the work that the water industry commissioner has undertaken to examine proposals that would give the minister and the Parliament a new framework to address affordability. I thought that the minister would have told the Parliament that that is happening. The work is continuing. The quicker we get it, the better, because the issue must be addressed soon.

Photo of Bristow Muldoon Bristow Muldoon Labour

There are significant questions about whether the proposals in amendment 97 fall within the powers of the Scottish Parliament. The amendment is an innovative attempt by Tommy Sheridan to introduce a redistributive taxation system. The appropriate place to address income tax and benefits is through the income tax and benefits system, which is a reserved matter. The appropriate place for the issues to be discussed is Westminster.

The SNP should clarify its position; it appears to be trying to sit on the fence. It does not wish to say that it supports Tommy Sheridan's proposals, but nor does it wish to oppose them. During stage 2, SNP members sat on the fence and abstained on the matter. The SNP should be clear and tell us whether it supports the proposed water tax. It should tell us whether, if the people of Scotland were unfortunate enough to see the party in power, the proposed tax would be added to the shopping tax that was launched last weekend.

Amendment 97 also raises issues of practicality, as the minister outlined. The amendment must be taken along with the proposals for a council income tax that Tommy Sheridan made a few weeks ago. Both measures would result in greater centralisation of decision-making in Scotland and in the Parliament. They would have uncertain impacts on the overall taxation burden on people in Scotland.

We must also address the issue of significant changes in taxation being suggested purely to deal with the water industry. What taxation does Tommy Sheridan or the SNP propose to deal with the many other demands that they make for health, education, transport and so on?

The Parliament should reject amendment 97, but I am interested in hearing the SNP be clearer about where it stands. Tommy Sheridan does not expect to be elected to power next year and I suspect that the SNP does not either, as it is sitting on the fence.

Photo of Donald Gorrie Donald Gorrie Liberal Democrat

I assure Tommy Sheridan that the Liberal Democrats, at UK level, have argued consistently for a more progressive tax system. We regret that the Labour Government in Westminster has not brought in such a system. However, we do not feel that using the water system is the right way to introduce progressive taxation. We will certainly continue to press for a more progressive tax system at Westminster, where MPs have the power to decide the issue.

We feel that the 40 per cent rate of income tax should go up for those who earn £100,000 or more, but we do not support amendment 97.

Photo of Des McNulty Des McNulty Labour

Questions must be asked about the mechanics and arithmetic of amendment 97. It seems strange that Tommy Sheridan is making a proposal whereby people would pay less for their public services—by his rhetoric—but more money would be made available for those services. There is a flaw in his argument that the scheme would deliver £201 million more for water and sewerage services in Scotland.

Tommy Sheridan is right to suggest that the average payment in the West of Scotland Water area for a family living in a band D house is £266. Under his scheme, a family living in a band D house in that area and on the UK average income would pay £534, which is double what they pay just now. There are real issues about the arithmetic of Tommy Sheridan's suggestion.

Why should we stop at water? Why do we not have income tax for gas and electricity? If we wanted to take the socialist line, we could do that.

Photo of Tommy Sheridan Tommy Sheridan SSP

We do not have a bill in front of us to do that.

Photo of Des McNulty Des McNulty Labour

Will some people end up paying three, four or five income taxes, so that the amount of tax that they pay exceeds considerably the amount that they earn? Is that the world that Tommy Sheridan wants? Perhaps it is, but he should at least be honest about it and not try to dress it up as something that it is not.

Photo of Tommy Sheridan Tommy Sheridan SSP

I will try to address the points that have been made in the order that they were made.

First, if the minister is absolutely honest with himself, he will conclude that he has failed to grasp the whole concept of the Inland Revenue being contracted to collect the money on behalf of Scottish Water. That is where the £20 million annual charge comes in. That is £25 million less than what is currently spent on collecting water charges.

Given the very restricted powers that the Scottish Parliament has, we must be innovative. We must examine the limited powers that we have to redistribute income. Every single one of us has already been recoded. Andy Kerr, the Minister for Finance and Public Services, could send me a letter breaking down in detail how much each individual in each income band would pay if there were a one penny increase in tax, because the Inland Revenue has already worked that out. We are talking about using that knowledge to have a redistributive form of Scottish water tax, which is where the charge and collection costs come in.

John Scott has the idea that my proposal would drive high earners from Scotland. The Conservatives used the same argument when they were opposed to the Scottish Parliament. I do not know whether he still opposes the Parliament now that he is a member of it, but his party certainly used to oppose it. The Conservatives used to say, "If we have the Parliament, all the high-income earners, the entrepreneurs and the business people will leave Scotland." I do not know whether this will wake John Scott up, but people are leaving already, yet we do not have progressive tax. Progressive tax will not force people out of the country.

Photo of Bill Aitken Bill Aitken Conservative

Mr Sheridan is correct to say that people are leaving Scotland, but does he agree that they are doing so to live in tax regimes that are much more liberal than ours? Few of them are leaving to go to countries that are more left-wing than here.

Photo of Tommy Sheridan Tommy Sheridan SSP

I am glad that Bill Aitken raised that point—we might even go into a wee double act together. Does he not know that no country in Europe has a lower tax rate than Britain has? Every other country in Europe has a higher tax rate than Britain has—even America taxes its wealthy at a higher rate than we do. For Bill Aitken's information, I advise him that 200,000 tax exiles from France live in Britain—they are exiled here because of the low tax regime.

Photo of Murray Tosh Murray Tosh Conservative

You have made your point, Mr Sheridan. Can we get back to amendment 97?

Photo of Tommy Sheridan Tommy Sheridan SSP

Mr Aitken should bear that point in mind. If he is suggesting that the introduction of a water tax would lead some Tories to leave Scotland, so be it. That, in itself, would be a reason to support the introduction of a water tax.

Bruce Crawford spoke about anomalies and about the fact that more work is required on my proposal, and I accept his point 100 per cent. The University of Paisley is producing an academic research paper. The university has already delivered its first report, which showed that my proposal is feasible, practical and would deliver a redistribution of income. On that basis, I appeal to the SNP to support my amendments.

On Bristow Muldoon's point about competency, I advise him that my proposal is competent. He was absolutely right to argue that tax issues are reserved to Westminster.

Photo of Bristow Muldoon Bristow Muldoon Labour

I raised the question of vires because, during stage 2, Tommy Sheridan justified his proposal by quoting schedule 5 to the Scotland Act 1998, which gives, as an exception to reserved matters,

"Local taxes to fund local authority expenditure (for example, council tax and non-domestic rates)."

My point is that Tommy Sheridan is not proposing a local tax—he is proposing a national tax.

Photo of Tommy Sheridan Tommy Sheridan SSP

What is important is what the tax is raised for—the water tax would be raised specifically to cover water and sewerage charges, which makes it an exception under the Scotland Act 1998.

We should increase top-rate tax, because 10p on the rate for those earning £100,000 a year would raise £3.5 billion. Is it not about time that Labour increased the top tax rate nationally? I am sure that, privately, Bristow Muldoon would admit that that should be done.

Des McNulty said that there was a problem with the arithmetic—he was right, but the problem is with his arithmetic. The difficulty is that he cannot add up. Households that are on the average UK income of £17,500 would pay £121 a year. A two-adult household in which both adults earn the average income would pay £242 a year. That is less than any of the average payments in Scotland now.

The proposals in amendments 97, 98 and 101 are redistributive, fair and progressive. I believe that they should be at the core of the Scottish Parliament's work, because they would deliver protection for our poor and for our pensioners.

Members:

No.

Division number 8

For: Canavan, Dennis, Sheridan, Tommy
Against: Aitken, Bill, Alexander, Ms Wendy, Baillie, Jackie, Barrie, Scott, Boyack, Sarah, Brankin, Rhona, Brown, Robert, Butler, Bill, Chisholm, Malcolm, Craigie, Cathie, Curran, Ms Margaret, Davidson, Mr David, Douglas-Hamilton, Lord James, Ferguson, Patricia, Fergusson, Alex, Finnie, Ross, Fitzpatrick, Brian, Fraser, Murdo, Gallie, Phil, Gillon, Karen, Godman, Trish, Goldie, Miss Annabel, Gorrie, Donald, Grant, Rhoda, Gray, Iain, Harding, Mr Keith, Henry, Hugh, Home Robertson, Mr John, Hughes, Janis, Jackson, Dr Sylvia, Jackson, Gordon, Jamieson, Cathy, Jamieson, Margaret, Johnstone, Alex, Kerr, Mr Andy, Lamont, Johann, Livingstone, Marilyn, Lyon, George, Macdonald, Lewis, Macintosh, Mr Kenneth, MacKay, Angus, Maclean, Kate, Macmillan, Maureen, Martin, Paul, McAveety, Mr Frank, McCabe, Mr Tom, McGrigor, Mr Jamie, McIntosh, Mrs Lyndsay, McLeish, Henry, McLetchie, David, McMahon, Mr Michael, McNeil, Mr Duncan, McNeill, Pauline, McNulty, Des, Monteith, Mr Brian, Morrison, Mr Alasdair, Muldoon, Bristow, Mulligan, Mrs Mary, Murray, Dr Elaine, Oldfather, Irene, Peacock, Peter, Peattie, Cathy, Radcliffe, Nora, Raffan, Mr Keith, Rumbles, Mr Mike, Scanlon, Mary, Scott, John, Scott, Tavish, Simpson, Dr Richard, Smith, Elaine, Smith, Iain, Smith, Mrs Margaret, Stephen, Nicol, Stone, Mr Jamie, Thomson, Elaine, Wallace, Ben, Wallace, Mr Jim, Watson, Mike, Whitefield, Karen, Wilson, Allan
Abstentions: Adam, Brian, Campbell, Colin, Crawford, Bruce, Cunningham, Roseanna, Elder, Dorothy-Grace, Ewing, Dr Winnie, Ewing, Fergus, Ewing, Mrs Margaret, Fabiani, Linda, Gibson, Mr Kenneth, Hamilton, Mr Duncan, Harper, Robin, Hyslop, Fiona, Ingram, Mr Adam, Lochhead, Richard, MacAskill, Mr Kenny, MacDonald, Ms Margo, Marwick, Tricia, Matheson, Michael, McAllion, Mr John, McLeod, Fiona, Morgan, Alasdair, Munro, John Farquhar, Neil, Alex, Paterson, Mr Gil, Quinan, Mr Lloyd, Robison, Shona, Russell, Michael, Stevenson, Stewart, Sturgeon, Nicola, Swinney, Mr John, Ullrich, Kay, Welsh, Mr Andrew

Photo of Murray Tosh Murray Tosh Conservative

The result of the division is: For 2, Against 80, Abstentions 33.

Amendment 97 disagreed to.

Amendment 25 moved—[Allan Wilson]—and agreed to.