SCOTTISH CONSOLIDATED FUND AND LOANS FUND

HC Deb 10 January 1978 vol 941 cc1450-613

Mr. Iain Sproat (Aberdeen, South)

I beg to move Amendment No. 386, in page 21, line 9, at end insert: 'of which the Secretary of State shall lay accounts before Parliament on or before 1st April each year'. While welcoming the Government's willingness to change their mind on the matter of a debate on the general taxation powers of any Scottish Assembly that may be set up, it is perhaps worth pointing out that the guillotine once again puts us in an invidious position. We should all like to discuss the taxation powers at great length, but we know that if we are to do so today it will mean that other important amendments will be squeezed out. This is yet another example of how we are absolutely strait-jacketed when it comes to considering this fundamental constitutional Bill. However, if a method is found to discuss these tax matters in a more general way, I should certainly welcome it.

One other matter that, perhaps, I should say I welcome, is that before Christmas the Press—rightly, I think—said that the reaction to our debates of people in all parts of the United Kingdom, including those in Scotland, was a big yawn. I think that that was true in Scotland no less than in other parts of the United Kingdom. But at least the strictures of the Press on the poor attendance before Christmas in the House on this matter seems to have been heeded. At least we have two Members of the Scottish National Party now here instead of the usual one—I suppose that is an improvement—and I am glad to see so many more of my own colleagues and hon. Members opposite present. I see that there are now three Members of the Scottish National Party here.

Our fundamental objection to the Bill remains the fact that it is likely to lead to the break-up of the United Kingdom. That is the overriding objection in the minds of many of us. But, at the same time, one of the other most important objections is that implied by the finances which will be necessary to get any Scottish Assembly off the ground.

We know from the Bill that the Government estimate the cost of setting up the Assembly at some £15 million. That is not a derisory sum when we are in an age of public expenditure cuts almost all round, when the referendum which we are to have to endure in the autumn, presumably, will cost us another £2 million and when the running costs of any Scottish Assembly—this is just the Scottish Assembly, not the Welsh Assembly, too—will be another £15 million. And, of course, if the Government estimate that it will cost £15 million now, by the time that reality and inflation have had their way, that figure will, no doubt, go up by a considerable extent.

Mr. Robert Hughes

Would the hon. Gentleman not also agree that there would be the tremendous additional cost of answering Questions—as he should know considering how much he cost the taxpayer this past 12 months?

Mr. Sproat

The hon. Gentleman is quite right, but one of our criticism of the Bill is that we shall not be able to ask questions of the Scottish Secretary of State about so many matters in Scotland. That is one of the diminutions of democracy that will inevitably follow from the Bill. I should have hoped that no hon. Member would criticise other Back-Bench Members for using what methods they have for trying to pin down the Executive or any Government and finding out what secrets civil servants or Ministers wish to hide from the public eye. I think that the Scottish Assembly will not assist democracy in that way.

I have talked about the running costs, the referendum costs, and the costs of setting up the Scottish Assembly. Then, of course, there are the block grant costs, which, as far as we can estimate, will be over £2,000 million.

Then there is the matter—which, with any luck, we shall debate later today—of tax-raising powers which any Scottish Assembly may have. Because of these necessarily huge financial implications, we put forward this amendment to try, by however little, to pin down the Government a little more and to make the Government, whatever Government it be, accountable to Members for the way in which that money is spent. Our prime object here is financial accountability.

I hope that it does not happen, but if a Scottish Assembly is to be set up, I should like there to be opportunity for the Public Accounts Committee to go line by line through the way in which that Assembly spends the money that we give it. It is not the Assembly's money. It is not raised in Scotland. It is given by the House of Commons—or such is the plan—under a block grant. It is House of Commons or United Kingdom Treasury money, and it should be up to the House of Commons to pin down a Scottish Assembly, through the Secretary of State here, as to exactly how that money is spent.

Sir David Renton (Huntingdonshire)

Would it not be appropriate for my hon. Friend to add that the money will have come from the general body of taxpayers of the United Kingdom?

Mr. Sproat

Yes, that was the point I was moving on to. It may be that, when he replies, the Minister of State will point to Clause 46 and say that there are methods whereby drafts have to be laid before the House and so on. That is not precise enough. We want the House of Commons to be able to levy the precise accountability of the amendment on the Secretary of State and, through him, on any Scottish Assembly that may be set up.

My right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) has rightly pointed out that the money which the Scottish Assembly will be spending will be money raised in greater part from taxpayers in those parts of the United Kingdom called England, Northern Ireland and Wales. Yet the people in England, Northern Ireland and Wales will not be able directly to control the way in which that money is spent. That is taxation without representation. It is one of the powers that we have always fought against in this House, yet that is what, by this retrograde step, we are once again giving to a subordinate Parliament the chance to exercise—that is, spending other people's money without those other people having a chance to say what is wrong.

It should also be noted that at the moment Scotland gets approximately 20 per cent. more per head out of the Kingdom Treasury than does England. I am sorry that the Scottish National Party's attendance has once again dwindled to the insignificant individual—I do not speak personally—that we all complained of before Christmas. I think it is extraordinary that, on this issue which so affects Scotland, at the sittings before Christmas over half the Scottish National Party Members did not make a single speech—not one. They made a few interruptions and they jumped up and down, but over half of them did not make a single speech. And here we are, back again to one Member sitting on the SNP Bench.

4.0 p.m.

Mr. Robert Hughes

The hon. Member should be grateful.

Mr. Sproat

I am not grateful. I enjoy their interruptions, because the stupidity of their interruptions underlines the stupidity of their overall case. So the more they intervene, the better for all of us who believe in the unity of the United Kingdom.

Mr. Douglas Crawford (Perth and East Perthshire)

The hon. Member will prob- ably agree that the percentage attendance of the Scottish National Party just now is considerably higher than the percent age attendance of his own party or that of the Government party.

Mr. Sproat

That is the most pathetic, slippery statistic that I have heard for a long time. One SNP Member is present, and the hon. Gentleman tries to pretend that that is good enough. No doubt, he will not be here after the next General Election anyway.

Mr. Nicholas Fairbairn (Kinross and West Perthshire)

I do not think that we should rely just on statistics. Those who believe in this great cause should be passionately involved and present in order to present it. It is not a question of statistics.

Mr. Sproat

My hon. and learned Friend makes a serious point. It is not good enough for a party to get elected to the House on matters pertaining solely to Scotland, never to vote on matters pertaining solely to England, and then on matters pertaining, as the Government would tell us, solely to Scotland, to have only one of its Members bother to turn up.

However, I return to the question of taxpayers in three parts of the United Kingdom having to pay for a Parliament which is supposed to affect only one part of the United Kingdom. That is justified in the way that it happens at the moment, when taxpayers in the Midlands of England subsidise employment, new industry or whatever it is in Scotland. That is justified now because we are a United Kingdom and Treasury funds are distributed on the basis of need, not on the basis of geography. But by setting up a Scottish Parliament we are setting up a Parliament not on the basis of need but on a basis of geography. That is the whole underlying principle of a Scottish Parliament. It is Scottish. It is geographic concept. Therefore, people who live in the other parts of the United Kingdom will be quite right to ask "Why should we, already overtaxed as we are, pay yet more taxes merely in order to give benefit to another part of the country whose needs are in many cases less than our own?"

I have often pointed out, and do so again, that unemployment in Liverpool is worse than unemployment in Glasgow. Therefore, why should the people of Liverpool have to pay greater taxes in order to help people in Glasgow who are in a better position than themselves? That cannot be right.

The point of this simple amendment—which I hope the Minister of State will feel able to accept, as he goes part of the way towards it in Clause 46, which follows—is that these vast amounts of money should at least be publicly accountable in the House of Commons. When I say "vast amounts of money", I should point out to people living in Scotland, as well as to the hon. Members in this Committee, that we are getting ourselves—those of us who represent Scottish constituencies—into a cleft stick. We are in grave danger of putting ourselves at a financial disadvantage by proceeding with this miserable Bill. If we proceed on the basis of a financial formula for the giving of a block grant to Scotland, I do not believe that there is any way that that financial formula will continue with 20 per cent. more for Scotland than there is for England, because Members of Parliament from the north-east of England will not wear that any more.

Mr. James Lamond (Oldham, East)

And the North-West.

Mr. Sproat

As the hon. Member for Oldham, East (Mr. Lamond) points out, other parts of England will not accept that any more, either. In a curious way, by trying to formalise our economic situation in Scotland, we shall actually cut the amount of Treasury funds that will be available to relieve distress in Scotland. We can either have it on the basis of need, irrespective of geography—where at the moment we get 20 per cent. above the odds—or on the basis of geography, and other parts of the United Kingdom will not accept that on the basis of geography Scotland should receive more than they do. It has been estimated that Scotland will be £500 million a year worse off if we proceed with this Bill as we are at the moment with the block grant to be given on the basis of some financial formula.

Dr. M. S. Miller (East Kilbride)

In his interesting argument, is not the hon. Gentleman putting forward a premise which may not be valid? Is it not possible that, with an Assembly, the Assembly Members and the Scottish people themselves will be able to make better use of the allocation of resources and finance given to them than is made at present? Therefore, as time goes by, is it not possible that the Scottish people will not need the extra 10 per cent. or 15 per cent. that at the moment they need from the rest of the United Kingdom?

Mr. Sproat

First, it is not 10 per cent. or 15 per cent. It is 20 per cent. It is a large amount more. Therefore, I think that the chances of our finances being handled more equitably or more sensibly, to the extent that the 20 per cent. extra which we already get would no longer be needed, are not very high, to put it at its kindest.

Mr. Teddy Taylor (Glasgow, Cathcart)

Where does my hon. Friend get the figure of 20 per cent? The latest information that I have was given in answer to a Question I put on 2nd December to the Chancellor of the Exchequer—that the extra for Scotland for devolved services by comparison with England and Wales was between 25 per cent. and 30 per cent.

Mr. Sproat

That just shows what happens to the deprivation of the country under a Socialist Government. Under the Tories the Scots were getting 20 per cent. Now they need 25 per cent. more to keep pace with what is happening in the rest of the United Kingdom. But the point is not whether it is 20 per cent. or 25 per cent., or the 15 per cent. mentioned by the hon. Member for East Kilbride (Dr. Miller). It is that Scotland at the moment receives substantially more per head than do other parts of the United Kingdom, and that would end if we had a Scottish Assembly because other parts of the United Kingdom would not wear it.

I know that the hon. Member for Inverness (Mr. Johnston), with whom we had so many agreeable dialogues in previous debates on this subject, believes that a Scottish Assembly would be, as he has called it so often, responsible. I do not say that it will not be. I just have my doubts about whether it will be.

First, let us suppose an appalling situation—that we had a Socialist Scottish Assembly. It is unlikely, because I do not think there will be a Scottish Assembly, and unlikely because people will have had enough of Socialism by the next election. But let us assume that it happened and that we had as spendthrift a Socialist Government in Scotland as we had seen—until the International Monetary Fund clamped down—in the rest of the United Kingdom. They would spend all the money they had, and then they would come back to the House of Commons and demand more. We should then have the Minister of State, if he were still in power, jumping up and moving little orders, resolutions or whatever for another £50 million here, another £40 there, and so on. It would all go through in an hour and a half after 10 o'clock at night. This is the sort of danger.

If the Minister did not do that—which would be bad enough—we should then have the Scottish National Party saying that the British House of Commons—it would no doubt call it the English House of Commons—was keeping down the people of Scotland by not giving them the money to which they were entitled. Perhaps the House would have to give out more and more money because of spendthrift—or perhaps generous or overgenerous, to take some of the unpleasant emotiveness out of the word—expenditure of public funds by a Scottish Assembly. On the one hand, it would come to us for more money, which would be a waste of public funds if we gave it. On the other hand, if we did not, we should be allowing a wedge to be driven between Scotland and England on this vital matter of finance.

Mr. Russell Johnston (Inverness)

Since the hon. Gentleman appears to be moving away from polemics to the actual meat of his amendment and to an explanation of its consequences, do I gather that, if the amendment were accepted, it would be in the power of the House, and indeed probably the proper thing for it to do, to express opinions on how precisely the Scottish Assembly spent its money, whether on hospitals, schools, housing or whatever? In other words, would the House of Commons attempt again to set the priorities for the Scottish Assembly which it had previously determined?

Mr. Sproat

In a word, yes. He who pays the piper calls the tune. If the House of Commons is providing the money, it has the right to say how that money shall be spent, within certain guidelines. How tight those guidelines should be will be up to the House to decide. All we are saying here is that, by having the accounts laid before it, the House would have the right to scrutinise, the right to criticise and the right, no doubt, in future to say "You wasted all this money last year. Not one penny more for this do you get next year." That is the sort of sanction which we should seek to impose if there were waste or abuse of funds by a Scottish Assembly.

All that I am asking the Minister and the House to accept is that if the British Treasury provides the money, the British House of Commons has the right to control how that money is spent. That is an absolute principle for me. We cannot have a Scottish Parliament spending, without regard to the person who gives them, the funds which it gets in the block grant. I am surprised that the hon. Member for Perth and East Perthshire (Mr. Crawford) has not jumped up—perhaps he is feeling rather embarrassed at his lonely position here—to point out that all of it would be North Sea oil money in any case. That is the usual cry in these cases. I point out that North Sea oil will last for 30 years. The coal beneath Yorkshire will last for 300 years. We are talking about British resources given by the British Treasury which should, therefore, be subject to the closest control by the British House of Commons.

Mr. Dalyell

I wish to raise three issues on the amendment. The first concerns the question of a Scottish Public Accounts Committee, which was referred to by the hon. Member for Aberdeen, South (Mr. Sproat). In the debate on the reports of the Public Accounts Committee yesterday, I asked the Financial Secretary to the Treasury: Where will the expertise come from to form a Scottish Comptroller and Auditor General Department? I pointed out that those of us who have served on the Public Accounts Committee of the House know the considerable expertise and skill that is needed by a Comptroller and Auditor General's Department. In answer to my question, the Financial Secretary said: It will come as no surprise to my hon. Friend to hear that these matters have not been determined in full. There are many aspects of the operation, following the setting up of the Assembly in Edinburgh, which will be the subject of further determination, and which will not necessarily be determined well in advance. Detailed discussions of these matters will continue."—[Official Report, 9th January 1978; Vol. 941, c. 1389.] It was clear that the Treasury, which is not normally hazy about these things, had not the proverbial clue as to precisely what would happen. Indeed, I asked last night, and again this morning, for a Treasury brief on this issue. It is very short. It comes from the Treasury, and its says of the Scottish Comptroller and Auditor General that He will be appointed by the Crown to hold office 'during good behaviour' and, like the Comptroller & Auditor General in London, will be independent of the administration of the day. I think that it is a fair telescoping of the point that is made simply to ask whether we have any clear idea of the difficulties of setting up a separate Comptroller and Auditor General's Department in Scotland—a Comptroller and Auditor General's Department to serve part, though only part, of a unitary State, and, furthermore, in a situation in which both the Law Society and the Faculty of Advocates have confirmed to me over the recess that they are very worried—that the worries put forward in the papers of February 1977 continue—about what is to be devolved and what is not to be devolved. All I say is that there are problems here.

Before we embark on a discussion of a Scottish Comptroller and Auditor General's Department, we ought first to be clear where the expertise will come from and the cost of it, because one cannot just hive off part of a Department. We must also be clear whether the accountants who have to deal with these matters will not run into terrible troubles in trying to settle what is their responsibility and what is the responsibility of the Public Accounts Committee in this House of Commons. There are great problems on this matter. This issue raises the most serious problems of financial discipline.

4.15 p.m.

To some of my colleagues I simply quote from a paper of 23rd March 1976 produced by the Scottish Labour Parliamentary Group. In section 3, headed "Financing the Assembly", paragraph A states: It is important to devise a method for arranging or negotiating the block grant that will exclude the possibility of detailed Treasury control. In paragraph B my colleagues came to the conclusion that It is fundamentally unsound that any body should spend large sums with no discretion for raising additional funds for additional expenditure and no benefit in reduced taxation from any economies in expenditure. That was the considered view at that time—indeed, I understand it has been over a number of years—of the Scottish Labour Parliamentary Group in the House. I am entitled to ask—there may be an answer—if it was true in 1976 that it was fundamentally unsound that anybody should spend large sums with no discretion for raising additional funds for additional expenditure and have no benefit in reduced taxation for any economies in the expenditure, how it is that in January 1978 it should not still be equally unsound.

We face impossibilities on the issues of public expenditure. Having an Assembly in part of a unitary State is an impossibility. Furthermore, it is unfair to add to the figures—this is the proper time to do it—precisely what any scrutiny as proposed in Amendment No. 386 will uncork. I give figures from "The Economy of Scotland—a Brief Guide", published by the Scottish Information Office Reference Unit. Page 3 refers to total identifiable public expenditure per head, which is as good a figure as any to take in such comparisons. In 1970–71, the figure for Scotland was £349 and for England £263; in 1971–72, the comparable figures were Scotland £392 and England £296; in 1972–73, Scotland £446, England £335; in 1973–74, Scotland £492, England £409; in 1974–75, Scotland £662, England £545. For 1975ߝ76, the latest available year, the figures are Scotland £846 and England £691.

When that information is scrutinised, it will be seen that if there is to be a separate Consolidated Fund there will inevitably be a number of English Members of Parliament who will be asking questions about parity with Scotland—very properly so. Those who want this Assembly in Edinburgh and those who want this kind of separate Scottish Consolidated Fund and separate functions should be under the clear understanding that our Scots fellow countrymen may be a great deal worse off in relation to total identifiable public expenditure rather than better off.

In these circumstances, the figures on total identifiable expenditure cannot continue in the same ratio once they are scrutinised. This is a situation that is no kind of a settlement, and it cannot possibly endure.

If we are to have a Scottish Consolidated Fund, that brings into relief the issue of precisely what happens to the Scottish Members of Parliament—all 71 of us—who are to remain here in Westminster. One of our main tasks, without any question, will be the simple issue of getting a bigger Consolidated Fund. What will happen is that for every shortcoming of the Assembly, every promise that is given by Assemblymen on the hustings and elsewhere and is not fulfilled—and experience of this kind of politics is that they are likely to give very many promises on the hustings that they cannot possibly fulfil—they will say "We could have done this but for a parsimonious English Treasury." Therefore, the job that will be given—and people do not like to accept the blame themselves in these matters—to the 71 MPs will be to increase the Consolidated Fund. That will be our main task in the eyes of the Scottish Assembly and of many politicians in Scotland.

Mr. Fairbairn

Does the hon. Gentleman appreciate that there would be an even worse position if there were a blank Consolidated Fund? Nothing would be easier than to omit from it emotive items such as housing, hospitals or a road for the oil industry and then say "We have spent our money. What will the English do about that?"

Mr. Dalyell

I should not wish to go on at length about that, partly because in December I read out a longish letter from a young constituent of mine—the chairman of the West Lothian Young Socialists, Mr. Brian Fairley—which made precisely that point. Indeed, he argued that if there were a concentration on housing it might, in the context of a Consolidated Fund, be at the expense of hospitals.

However, once it was discovered that hospitals in Scotland were less well staffed and less well provided for, who would believe that that was the decision of the Assemblymen, who had given housing the priority? Nothing of the kind would occur. It would simply be said "Our hospital provision is less good than that south of the border. Therefore, it is up to the 71 Scottish MPs to get more from the pork barrel."

Furthermore, within the hospital schemes one can think of a refinement on the topic. Let us suppose that a decision was made by the Assembly to put more into general hospitals at the expense of mental hospitals. It would then be found that no one would be satisfied with the level of expenditure on Scottish mental hospitals. I am not being a Jeremiah but am considering the realities of the situation. There would be an outcry that Scottish mental hospitals were not in the same position as English mental hospitals.

If the Lord President or the Deputy Chief Whip have a flicker of doubt about that, I should like to examine what has happened in education. For years, hon. Members of the Scottish National Party have flourished on the argument that Scottish primary school teachers are less well paid than those in England. That is a grievance that has been exploited by the Scottish National Party. I agree that there is a certain differential, but why did that happen? That has not been revealed to the Scottish public.

The reason is that people like my hon. Friend the Member for West Stirlingshire (Mr. Canavan)—and, indeed, myself in a previous incarnation—as so-called Chapter 5 graduates, were paid substantially more than our English counterparts. That was a decision, subject to pressure from the EIS, of the Scottish Education Department—a decision made in Scotland by Scots and for Scots. It was not, of course, revealed that it had been done at the expense of our primary school teaching colleagues. I shall be pleased to give way to a former Minister on this point.

Mr. Robert Hughes

My hon. Friend has not got it quite right. The decision was taken not by the Scottish Education Department but by the EIS during the teachers' pay negotiations. The Department was not responsible for what happened. The decision came as a result of negotiations by Scottish teachers with the Government.

Mr. Dalyell

I said "under pressure from the EIS". However, my hon. Friend states the position accurately. The decision was taken by Scots, following strong pressure from the EIS. No great play was made of the fact that our honours graduates in the teaching profession were significantly better off than honours graduates doing the same work in England. That is exactly what will happen under a Scottish Consolidated Fund.

Dr. M. S. Miller

Will my hon. Friend tell us what were the dire consequences of that state of affairs? What is he so worried about?

Mr. Dalyell

One of the dire consequences was that it was grist to the mill for the Scottish National Party. In my constituency and elswhere one of the root causes of Scottish nationalism was the fact that primary school teachers in Scotland were less well paid than those in England. It was a marvellous, simple, crude propaganda argument, and it is that kind of argument that will be enlarged time and again, with dire consequences. My hon. Friend represents, as I do, a new town. He can imagine how, in his new town, this situation will be repeated, with variants, and will add to the reputation of the Scottish National Party and be grist to its argument in favour of going further—into a federal State and into a separate Scottish State. We are on this road.

Mr. Russell Johnston

The hon. Gentleman amazes me if he alleges that the rise of the SNP in West Lothian was due to the fact that Scottish primary teachers were paid less and that it was, to quote the hon. Gentleman, a simple, crude propaganda argument. Surely he is more than capable of rebutting simple, crude propaganda arguments.

Mr. Dalyell

The hon. Gentleman will acquit me of being over-simplistic. I should have made it clear that this was the kind of grievance to which I was referring. It was certainly not the desire for 150 Assemblymen in Edinburgh that gave the impetus to the Scottish National Party. It was all sorts of other grievances. It did not grow from those who were dedicated to an independent State. I would not say that, although there is a hard core. A great deal of the impetus to the rise of the Scottish National Party came, as is legitimate in politics, out of the exploitation of grievance.

The amendment highlights the possibilities for a marvellous exploitation of grievance and will help the Scottish National Party down its road, a road that I do not wish to travel.

The Chairman

Before I call the next hon. Member, I wish to say that, in response to what I believe to be the general wish of the Committee, I have decided to select next Amendment No. 543, in the name of the hon. Member for Berwick and East Lothian (Mr. Mackintosh), in a slightly revised form, and with it his proposed new schedule, which appears as Amendment No. 544. Copies of revised Amendment No. 543 are now available at the Table.

Mr. Francis Pym (Cambridgeshire)

On a point of order, Mr. Murton. In view of that decision, which I think will be welcomed by the Committee and was made in response to strong representations from the Government side, would it not be reasonable to ask for an additional day to debate the financial provisions? We are today attempting to debate the issues arising in 19 clauses and one schedule. We have a procedure which has been adopted in response to requests from Government Back Benchers—to which I do not object—namely, to have an amendment starred in a revised form. There will clearly be considerable debate upon it, and the Minister said that he wanted to reply to it.

I think it reasonable to ask that, in view of that, we might have another day. As the Lord President and Leader of the House is here, perhaps he could respond in a favourable sense to that request as a consequence of what has now been decided.

Mr. J. Grimond (Orkney and Shetland)

I am sure that the Committee will be grateful to you, Mr. Murton, for having made it possible to discuss an amendment about the method of taxation in Scotland, which is a matter of the greatest importance and which exercises a great many members of the Committee. I reinforce the plea for some additional time to do that.

I confess that I do not feel happy about the results of the guillotine. It may be true that many Second Reading arguments have been repeated constantly, but it is also true that many clauses and amendments have gone through without any discussion. If it were possible to look at the matter again, I believe that that, too, would improve our examination of the Bill.

The clause and the amendment relate to the source of Scottish revenue and its control. As the Bill stands, for better or worse, the source is quite clear: Scottish revenue will be obtained by payments from the United Kingdom Treasury. I might say in parentheses that, as I understand it, even if it were decided to hand over to Scotland certain sources of revenue, that would still be done by the United Kingdom Parliament, and the Scottish Assembly could go only as far as the United Kingdom Parliament had agreed. As the Bill stands, these payments will be made on the authority of the Secretary of State, with the consent of the Treasury, and the Secretary of State will remain a member of the United Kingdom Government responsible to the United Kingdom Parliament, and his activities can be questioned in the House of Commons.

4.30 p.m.

My constituents have some anxiety lest the Scottish Parliament should raid its oil funds, either directly or indirectly, by attempting to cut down other allocations because of the existence of these funds. It is reasonable to argue that it is not beyond the bounds of possibility that even the United Kingdom Parliament might be tempted to raid oil funds. I remember the days when over-centralisation in London was much complained of in the North of Scotland, but the present anxiety concerns the Assembly.

These oil funds will be needed to restore the economy of Orkney and Shetland as the oil runs down. Again, I must emphasise that oil is by no means an unmitigated blessing—rather the reverse. It has faced my constituents with grave problems. They have had to meet high expenditure; prices have risen to the point at which we now virtually have two economies in Shetland—the normal one and the very expensive oil economy. We find ourselves involved in various disputes, and ultimately, unless it is well handled, oil could permanently damage the basic industries of agriculture, fishing and knitwear.

The oil revenues by themselves will not be sufficient to put our economy back on a sound course when the boom is over. For instance, they will not make good mistakes over transport, fishing or agriculture policies, but they will help. They must be safeguarded, and I think that the House agrees that they should be safeguarded. I believe that the Government themselves believe that they should be properly used for the purpose of restoring the economy of Shetland and Orkney. They are exceptional revenues to be put aside for exceptional purposes. They must not be shunted towards ordinary annual expenditure. I am sure that no one in this Committee wants to repeat the mistakes of the past century, which resulted in whole areas being left derelict when some industry or coal mining had finished.

The United Kingdom Parliament will retain some supervision over the Scottish revenues, but I think that it would be unwise of it to attempt to supervise in detail how they were expended. However, I take it—and doubtless the Government will confirm this—that the fact that the Secretary of State is responsible, the fact that they come out of the United Kingdom Treasury, and the fact that they are voted from Parliament must give Parliament some right generally to question how they are supplied. Furthermore, it would be impossible for the Assembly to raise revenue from other sources unless the House of Commons approved it. The Assembly's sources of revenue, whether they be as they are at present under the terms of the Bill, or whether new sources are added, can be granted only by the United Kingdom Parliament. Even if this amendment were rejected the House of Commons would certainly be able to examine the supply of these revenues.

I do not know whether this amendment is necessary in the event. I have no objection to it as it stands. But it seems to me that the House of Commons has its ordinary powers to examine the activities of the Treasury, and in this case the activities of the Secretary of State. I should be grateful if the Minister would indicate whether he thinks the amendment is necessary to ensure that the House has sufficient powers.

I emphasise that, as I understand the present proceedings, all the financial powers, whether we like it or not, derive from the House of Commons. This is not the time to debate whether they should or should not—that will come later—but the financial power derives from the House of Commons, and the House therefore retains its right of control. Therefore, although I think it unwise to go into detail as to how the finances are expended, no doubt this power gives the United Kingdom House of Commons some right to question the Secretary of State and the other financial authorities, and to ensure that the Scottish Assembly does not go outside its powers in an attempt to raise revenue from other sources.

Mr. Graham Page (Crosby)

Clause 42, to which the amendment seeks to add a few words, starts off boldly by saying: There shall be a Scottish Consolidated Fund and a Scottish Loans Fund. One would have thought from those words that these funds were to be raised from Scottish resources. In fact, of course, as has already been said, one sees later in the Bill that the Scottish Consolidated Fund comes out of the Consolidated Fund controlled by Parliament here, and the Scottish Loans Fund is money advanced from the National Loans Fund controlled by the United Kingdom Parliament. All the money comes from money controlled by this Parliament.

Although some of that money may come from Scotland originally, by taxation in Scotland, the amount of taxation per head in Scotland is very much less than that in England. In fact, from the figures I have—I take this from Hansard, 16th November 1976, c. 511—for the year 1975–76 the estimated tax revenue per head in Scotland was £467 and in England was £516. Expenditure per head in Scotland has already been mentioned, and, whether it is 20 per cent., 25 per cent., or 30 per cent. more per head, it is undoubtedly greater than expenditure per head in England.

It therefore seems right that the United Kingdom Parliament should have an account of the expenditure in Scotland—an account of the money which is being provided by this Parliament, and in the main from taxpayers outside Scotland. It cannot be said by Scotland "It does not matter, because all that is happening is that the money collected in Scotland is being returned to us. Why do you want an account of that?". That is not right.

In considering what might be done with that money without any reference to the United Kingdom Parliament, we see that subsection (2) makes an extraordinary statement—that the Scottish Secretary may from time to time cause sums to be transferred from one to the other of those Funds. [HON. MEMBERS: It is "a Scottish Secretary."] Whether it be "a" or "the", it is a Scottish Secretary not responsible to the Parliament at Westminster. Therefore, an amount subscribed from the United Kingdom Consolidated Fund by this Parliament to the Scottish Consolidated Fund may suddenly be switched to discharge loans from the Scottish Loans Fund.

Mr. Dalyell

Can the right hon. Gentleman explain why his Amendment No. 379 seeking to leave out subsection (2) of Clause 42, which was on the Amendment Paper yesterday, does not appear on it today? If there are reasons for this, some of us would like to hear them.

Mr. Page

I have been given the reason. Having collected one sheet of amendments from the table in the "No" Lobby and having found that my amendment was selected, I was then greatly disappointed to be informed by a very courteous note from the Clerks of the House that that was an error and that the new list did not bear my amendment. I was disappointed, though I do not question the decision to omit it. I can say all I need to say on the present amendment.

Much can be done with these funds without any further reference to this Parliament which provided them. The Scottish Secretary may switch from one fund to the other. The Scottish Comptroller and Auditor General may authorise payments from these funds without any reference to this Parliament because the Scottish Comptroller and Auditor General is not responsible to this Parliament. If either fund is overdrawn, the Scottish Secretary can borrow up to £75 million to put it right without any reference to those who will be responsible for repayment of that loan—that is, those to whom this Parliament is responsible.

The nearest one gets to accounting to the United Kingdom Parliament is the fact that the Scottish Loans Fund cannot exceed £500 million without an order of the House of Commons, and overdraft borrowing cannot exceed £75 million. But that is scarcely clear accounting to the House of how the fund is being dealt with. An account of the Treasury guarantees has to be provided to the House, but that, surely, is shutting the stable door after the horse has gone. When the Scottish National Loans Fund cannot repay what it has borrowed, the United Kingdom Treasury gives a guarantee for it. I am not surprised that it has to come to the House of Commons for approval of such a guarantee, but that is not accounting to the House.

All the responsibilities of the Secretary of State for Scotland to come to the House for certain orders and consents are piecemeal, and the amendment requires that Parliament be given an overall picture by an annual account. There is nothing extraordinary in such a request. Clause 55 requires the Secretary of State to provide an account of these funds to the Comptroller and Auditor General and that account has to go before the Scottish Assembly, after comment by the Comptroller and Auditor General. If the Secretary of State has to prepare that account for approval by the Comptroller and Auditor General, and if it has to go before the Scottish Assembly, why cannot the account be laid before the House so that the House, which has provided the money, can study and debate it?

The Scottish Assembly is to be allowed to debate what is done with money supplied by the United Kingdom Parliament and the United Kingdom taxpayer. Why cannot the House of Commons be allowed to do exactly the same, and why cannot that account, to be provided under Clause 55, be laid before the House? That is all we are asking in the amendment. I am not putting forward any matter of principle regarding control of the detail of expenditure, but the House should be entitled to examine the accounts and, if necessary, to debate and criticise them. We could then consider to what extent that criticism would be effective upon the Secretary of State for Scotland. However, the House should not be left without any account of what is done with its money.

Mr. Robert Hughes

The first question that has to be asked about this amendment is whether it is necessary or effective. The simple laying of accounts before the House of Commons does nothing whatsoever to guarantee that the matter will be debated, or that there will be any control over it. I should have been happier if the amendment had requested that the accounts be not only laid before but debated by the House. It might be argued that the House would still have the opportunity to argue and discuss what was happening in Scotland regarding devolved matters.

How could that be done? One method is through the Consolidated Fund. We all know the annual procedure whereby the Consolidated Fund Bill is published. It is then open to every Back-Bench Member to put down a subject on a particular Vote, raising subjects as varied as the provision of through-deck cruise missile ships and the state of the pavements in a street in one's own constituency. Will that opportunity still be available to us if there is a Scottish Assembly?

I cannot see how the Consolidated Fund Bill can be published without the amount of the block grant being part of that Bill. If that is the case, we are perfectly entitled to raise any question whatsoever on the block grant—or whatever it may be called and under whatever Vote head it may be in the Consolidated Fund Bill—about what is carried out under devolved issues.

4.45 p.m.

Many people say, in some cases with some justification, that we are unwilling to leave to the Scottish Assembly the power to do what it likes within the issues devolved to it. They point out that the people who are part of the Assembly will be so responsible that they will need no overseeing from us. To some extent, that may be true except that we, as elected Members of the House of Commons in a United Kingdom system, are entitled to raise issues affecting constituents whether those constituents are in the narrow border lines of our constituencies, or whether a constituency is taken to mean any geographical part of Scotland or, indeed, of the United Kingdom. It would be very difficult for me to turn people away from my surgery or to reply to people who wrote to me by saying "Sorry, chum, there is no point in writing to me about it. That is a matter for the Assembly." I do not think that I have the right to remove myself from the responsibility for what happens to people in any part of the United Kingdom, irrespective of an Assembly.

The issue goes much deeper than that. If Assembly discussions are anything like the discussions we have in the House of Commons, or if they are about politics generally in Scotland, I am afraid that the real issues of politics will not be discussed. My hon. Friend the Member for West Lothian (Mr. Dalyell) raised the matter of teachers' salaries. I remember the case that was made at the time of the salaries dispute about how Scottish teachers were being done down compared with their English colleagues, when in fact the reverse was the case.

The SNP has introduced into Scotland the politics of grievance, though not the politics of grievance in the broad sense about real issues of economic power and who wields it, and, because one has financial control, how people's lives can be manipulated. SNP Members are picking on small issues, exploiting them and trying to make out that they are doing it on a nationalistic basis when the reverse is the truth.

There may be cases in which people in Scotland are less well served than in England, but nine times out of 10 that is because of the way in which their institutions have developed. In lots of ways, it is the craziest reason to want to have a Scottish Assembly in order to achieve parity with England, which is what the cry always is. That is bad enough. I suppose we need not be surprised if grievances are exploited. Most of us, if we put our hands on our hearts, can hardly plead innocence when it comes to exploiting grievances.

I detest the politics of SNP Members, especially when they manufacture grievances. They come out with stories which have no relevance to the truth. There is an example in yesterday's Hansard. It shows why we must maintain some control of discussion over the work of the Assembly and over its finances. Yesterday the hon. Member for Dundee, East (Mr. Wilson) asked a Question about offshore oil exploration. He was given an answer, but in his supplementary question he said: Is the Secretary of State aware that the suspicion is developing in Scotland that because of the delay in forwarding exploration in the south-west approaches of the English Channel the policy of the present Government is to try to exhaust Scottish oil reserves first by leaving English oil reserves for the future benefit of England? "—[Official Report. 9th January 1978; Vol. 941, c. 1253.] That is the politics of the big lie. These are the allies of Dr. Goebbels speaking when they manufacture that kind of claptrap, because I know of no one in Scotland who would believe that kind of nonsense. It denies completely where the oil was discovered.

Mr. Crawford

The hon. Gentleman is worried.

Mr. Hughes

Yes, I am worried. I am worried when fellow human beings, whether Scots or English, talk such disgraceful and downright lies and put into people's minds the idea that the United Kingdom is governed on a racialist basis of English versus Scots, or Scots versus English.

Mr. Crawford

rose—

Mr. Hughes

I am willing to give way to the hon. Gentleman, but I see that he has had second thoughts. I do not blame him for having second thoughts, because he has only two choices—either to deny that kind of allegation or to apologise for it, and I am sure that he is not willing to do either.

Mr. Douglas Henderson (Aberdeenshire, East)

He will in his own time.

Mr. Hughes

Yes, I bet he will, and I hope that he answers my point. As long as this kind of politics is being purveyed throughout Scotland and England, it is essential that we in this place should be willing to debate Scottish issues at all times in order that we may totally deny such untruths and big lies put about by the purveyors of hatred who are abroad in Scotland today.

Miss Harvie Anderson (Renfrewshire, East)

I support the amendment. It is an extremely important amendment, and I cannot see why any Government should resist it. We are dealing here with Scottish funds, but they come from United Kingdom sources. There can be no argument about that. Therefore, it seems perfectly reasonable to expect there to be some public accountability and that that accountability should lie in the House of Commons. The Minister may tell us that that is provided for, and he will no doubt refer, among other things, to Clause 55, but I do not see that as a reason, or even as an excuse, for not accepting this very clear amendment at this point.

I shall dwell for a moment on the problem—because it is a problem—of public accountability. We must all accept on both sides of the Committee that there is a growing feeling throughout the country that there is insufficient public accountability, and there has been pressure—it has been maintained fairly consistently in recent months by leading newspapers—for having greater public accountability, not less. The debate in the House yesterday in some way points to the acknowledgment of that feeling.

If we deny this amendment today, we shall simply deny further to the public that the House of Commons believes in public accountability, and for that reason the Government would be wise to accept it.

The point has already been made that this is taxation without representation, but, if I may verge on the borders of order, Mr. Murton, as we have just had put before us the new Amendment No. 543, I must say that some parts of it suggest to me a flight with one's pound in the pocket while there is still time. There is no use in the Minister looking surprised. That is the sort of thing that will follow from this impossible Bill, because we are creating conflict, perhaps more acutely in the region of Treasury control—or lack of it—than in any other area.

As regards additional tax-raising powers and the definition of who will pay, falling within whatever category the hon. Member for Berwick and East Lothian (Mr. Mackintosh) tries to define, there will be such confusion that the need for accountability at every stage and in every way will be greatly increased, not decreased. Even if, as I suspect, the hon. Gentleman's amendment fails when it is discussed, there will be pressure along those lines for as long as any Assembly envisaged is denied tax-raising powers. Because we know that that will prove to be so, some of us are determined to press now for the maximum amount of public acountability.

I finish these few remarks by observing that throughout the Bill there is increasing evidence of the areas, be they narrow or wide, where conflct will come. But the conflict that will arise in this kind of area will be caused by resentment when people in one part of the kingdom find themselves paying more towards another part of the kingdom and that that part of the kingdom will have spent for it moneys which come from elsewhere, and, therefore, that he who pays the piper will have no call either on the tune or even on the ability to come and see it played.

Mr. Dalyell

The right hon. Lady is a former occupant of the Chair. Will she comment on how easy or how difficult it would be for the Chair to decide when faced, as it inevitably would be, with delicate questions on what was in order and what was not in order on financial matters?

Miss Harvie Anderson

Mr. Murton, you would not expect me ever to presume to make any pronouncement on behalf of the Chair, except to express my undying admiration for those bold enough to occupy it. I think, therefore, that I must leave that.

Mr. Crawford

I should like to begin by saying how much I deprecate the comments made about the Scottish National Party by the hon. Member for Aberdeen, North (Mr. Hughes). He accused the SNP of being allies of Dr. Goebbels.

Mr. Robert Hughes

That is absolutely right—disciples of Dr. Goebbels.

Mr. Crawford

I thought the word was "allies", but if the hon. Gentleman said "disciples"—

Mr. Hughes

I am quite happy with "allies". What I meant to say was "disciples", but in either instance it is perfectly true.

Mr. Crawford

I think that it is absolutely disgraceful to say that about a party, many of whose members fought in the last war, which is trying to stand up for a nation which lost more people per head of population than did England. I am not saying that that is good I am stating it as a fact. I deprecate the use of descriptions such as "Dr. Goebbels" against the SNP by the hon. Gentleman, and the fact that he is not prepared to withdraw them says something for a very sick mind.

I return to the amendment. I shall speak to it and not make a Second Reading speech, as most other hon. Members have done, apart from one matter. The hon. Member for Aberdeen, South (Mr. Sproat) said that the reason behind the Bill was one of geography. I suggest that it is also one of politics and that we would not be debating the Bill at all had it not been for the increase in the number of SNP votes and the fright that the Labour Party had before the last election about possible SNP gains.

I find the amendment rather strange, however. It seeks to strengthen the power of Westminster by ensuring that the Secretary of State shall lay accounts about the Assembly before Parliament at a given time, and the hon. Member for Aberdeen, South went further and said that the House of Commons would be able to look into the details of them. I say to the hon. Member for Aberdeen, South and the whole of the Conservative Party that a change would appear to have taken place from their tactics before Christmas to what we are witnessing now. I am not sure whether this amendment is official Conservative policy or maverick Conservative policy.

The point I want to make, however, is this. The Bill seeks to strengthen the power of this Parliament. The Conservatives voted against Clause 1, which stated that the Bill did not affect the unity of the United Kingdom or the supreme authority of Parliament to make laws for the United Kingdom or any part of it. The Conservatives and the hon. Member for Aberdeen, South and his hon. Friend the Member for Glasgow, Cathcart (Mr. Taylor voted against the override powers in Clauses 36, 37 and 38 which sought to ensure that the Secretary of State had some say in what the Scottish Assembly did. The hon. Member for Aberdeen, South and his hon. Friends voted to remove those override powers. Now it would appear that he and his hon. Friends are trying to put them back.

But perhaps more important than that is that the hon. Member for Aberdeen, South and his hon. Friends also voted against Clause 39, the first sentence of which states: The Secretary of State shall with the approval of the Treasury prepare guidelines apropos the Scottish Development Agency, and so on. He and his hon. Friends voted to remove the power of the Treasury and the Secretary of State over the Scottish Development Agency. On Clause 40, on which the Government were defeated, he and his hon. Friends joined the SNP and the SLP to make sure that the pay policy did not run in Scotland. I should have thought that that would ensure that this would take even more powers away from Westminster. So, on these two vital industrial matters—Clauses 39 and 40—the hon. Gentleman and his hon. Friends voted against the power of this Parliament to legislate for economic matters.

Mr. Pym

I think that the hon. Gentleman will agree that the rehearsal of those votes and the misrepresentations that he seeks to make about them does not help the Committee in considering the financial provisions of the Bill.

5.0 p.m.

Mr. Crawford

I had always thought that the English language meant the English language and that if one voted against something one voted against what it said. I shall not bore the Committee by reading out what Clauses 39 and 40 say. I merely tell the Committee that in Clause 39 the Government sought to make sure that the House and the United Kingdom Treasury had some control over, and could give guidelines to, the Scottish Development Agency. Clause 40 said that the House should have control over pay policy, that the pay policy writ should run in Scotland. The Conservatives voted against those clauses. I take the English language to mean what it says.

Mr. Fairbairn

I am very impressed by the Scottish National Party's concern for the English language, but what in the English language is "an override power"? I am sure that that is not English.

Mr. Crawford

That is such a silly question—

Mr. Robert Hughes

As the hon. Gentleman says that the English language means the English language, is he prepared to withdraw the allegations made yesterday by his hon. Friend the Member for Dundee, East (Mr. Wilson) and reported in Hansard?

Mr. Crawford

I do not see that that is relevant to the amendment. The point that I am trying to make is that the amendment seeks to give additional powers to this Parliament, when those who tabled it voted before Christmas against that being done. Have they had new instructions from the Leader of the Opposition? Have they once again changed their views on the matter? Has the Grand Duchess of Finchley marched her troops up the hill only to march them back down again after Christmas? Or is this another example of Conservative bungling on the Bill? There is no logic in the Conservatives' case.

I should be happy to give way to the hon. Member for Aberdeen, South if he wishes to intervene to explain why, after voting against giving Parliament and the Treasury control over the Scottish Development Agency, he now wants to put that control back. He wanted Parliament to have nothing to do with pay policy in Scotland, yet he wants it to have control over tax-raising powers.

The amendment is foolish and illogical. I shall be glad if it represents a change in Tory Party thinking, and shall be grateful for confirmation of that. But my party will certainly vote against the amendment.

Mr. Gerry Fowler (The Wrekin)

Without embroiling myself in the politics of Scotland, I wish to oppose the amendment. It is an extraordinary amendment. The proposal is that the accounts of the Scottish Consolidated Fund should be laid before the House.

What would be the purpose? Clearly it would not be so that hon. Members could inform themselves about items of expenditure out of the Fund, because the accounts of the Fund will in any event be published under Clause 47. Therefore, any of us could easily obtain those accounts if we were interested in the detail of Scottish expenditure. It cannot be that we should wish to check on the financial propriety and regularity of that expenditure, because Clauses 55 and 56 deal with that matter. After the Scottish Comptroller and Auditor General has investigated the accounts, their financial propriety and regularity will be certified.

It can only be so that we in the House should, if opportunity arose, take the chance to discuss in retrospect elements of Scottish expenditure. That would seem to me a thoroughly bad principle, because it totally denies devolution. We cannot simultaneously say that we are devolving responsibility for these matters but that we wish to retain the right in retrospect to discuss and criticise the priorities and policies determined by the Scottish Assembly, as expressed in financial expenditure.

To give an analogy, it would be as if we were to say each year that not only shall we debate rate support grant orders but we shall insist that every local authority in the land lays its accounts before the House, so that we may debate in detail any item of expenditure by any local authority. We do not do anything so silly.

If we passed the amendment, we should be saying that the Scottish Assembly would be in relationship to the House in a position lower than, humbler than, that of any local authority in the realm, because its expenditure could be debated in retrospect in detail in the House, whereas that cannot happen with any local authority. What would be the purpose of such a debate? Let us imagine—I shall not say per impossible, but I shall say per implausibile—the Scottish Assembly were controlled by the party presently in opposition here—

Mr. Crawford

Which one?

Mr. Fowler

The major party presently in opposition.

Let us assume that we had the same Government as we have now. I should certainly take the opportunity to pore over the details of the expenditure of the Scottish Assembly, because I am certain that I should not approve of the priorities imposed by the hon. Member for Glasgow, Cathcart (Mr. Taylor) for example, if he were a member of the Assembly and a Scottish Secretary. He would greatly resent it if I were to do so, and he would be right to resent it. It is not the task of the House of Commons to give with one hand and take away with the other.

I hope that we shall spend very little more time on so silly an amendment as this.

Mr. Ridley

I make no apology for making my debut on this Committee stage with a few remarks about the amendment and this whole subject dealing with the financial burdens that it will at some stage become apparent to my constituents in England they will have to bear. If I can avert the tragic scenes of fury and distress that will occur at a later stage, I shall try to do so by casting my vote for the amendment, because I believe that this part of the Bill contains the seeds of the most bitter dislike and resentment between the two countries of Scotland and England that it would be possible to plant.

I wish to begin with the rate support grant analogy of the hon. Member for The Wrekin (Mr. Fowler), the nearest analogy to the block grant for the Scottish Assembly. The hon. Gentleman will not be unaware that the Government's political manoeuvrings in switching the rate support grant from the sparsely populated rural counties to the densely populated cities, where expenses are lower the theory, has caused deep resentment in the shires, such as in my constituency.

Mr. Fairbairn

And mine.

Mr. Ridley

At least in the case of the rate support grant there is the safety valve of the rates, because the grant is, depending on what authority one considers, in the region of 60 per cent. to 70 per cent. of the total expenditure. Therefore, there is at least the possibility of taking out excess spending by increasing the rates. It would be impossible to do that in the case of the block grant for Scotland.

I want to ask some questions following on the excellent speech of my right hon. Friend the Member for Crosby (Mr. Page), who pointed out that the yield of taxation per head in Scotland is considerably lower than that from the English regions, and that Government expenditure per head in Scotland has tended to be higher. We do not know by how much, but it has tended to be a little higher.

Will the block grant be calculated on the contribution to taxation per head of the Scottish people or on the present levels of expendture per head, or will it be calculated on the mean for the United Kingdom—that is, their share? Therein lie the seeds of major dissent, argument and even bitterness. I hope that the Government will tell us the answer, because it is vital to know on what basis they will calculate the total of the block grant.

Whatever basis the Government choose, the following will happen. When the Assembly takes over, the only way in which it can increase its income is by squeezing more money out of the United Kingdom Treasury. There are no powers for it to increase taxation or rates. I know that we shall discuss this matter later, but it is clear from what we have already heard that the Government will not grant tax powers. The only way to increase spending in Scotland is by screwing up the English Treasury. What opportunities! When has there ever been a more sophisticated weapon for financial blackmail than that which is put into this Bill?

Suppose a Scottish Assembly abolished council house rents, as it would be perfectly entitled to do, and provided houses free; after nine months it would be running out of money and would have to do something like closing down some of the schools. One can just imagine the television programmes showing Scottish children unable to go to school because of the parsimony of English Ministers. Imagine the way in which that could be exploited by an unscrupulous Assembly. In such a case the only way of getting any more money would be to exploit the English.

It seems vital that we should control the total of the block grant, in concert with our Scottish partners. This should be a British, not an English, exercise, and it would keep control of the kinds of ways in which the money would be spent. I do not mean that control would be imposed in the sense of influencing decisions: it would be imposed in the sense of making the public aware of what decisions had been made. If the accounts were laid before this House and they showed that money had been wasted in one particular direction and this was why the block grant was insufficient, that would provide a basis on which we could say that we would not increase that block grant because the money had been spent in a profligate fashion, which had been entirely the fault of the Scottish Assembly. We could say that this did not provide a reason to compel the British Parliament to release a greater block grant.

This arrangement of the block grant will lead to nothing but bitterness and resentment which will not only hasten the split between the two countries in the minds of the Scottish people but will stir up resentment against the whole arrangement in the minds of the English people as well.

If we are able to do anything at all to assist in this difficult decision pertaining to the arrangements for financing of the Assembly, we should do everything we can to improve the understanding of them. Control will be a tiny step in the direction of palliating the seeds of bitterness that we are sowing in the Bill. I do not believe that this amendment will cure the problem, but if it makes it a little better, and provides even a 1 per cent. improvement in the situation, then I welcome it.

Mr. Gerry Fowler

Can the hon. Member tell the House whether he believes that the great virtue in the present situation is that we spend more per head in Scotland on publicly provided services than we do in England, whereas revenue per head in Scotland is lower than it is in England? How does this fit in with his conception of democracy?

Mr. Ridley

I am seeking to support the amendment, which would give us more information of what is being spent in Scotland. The hon. Member for The Wrekin has just made a speech saying that he does not want to know. Apparently he wants to study the accounts of the Scottish Assembly by taking the train to Edinburgh rather than study them here in the House.

This amendment begins to open up the vital importance of the principle that if we are to stave off the bitterness of taxing one nation to pay for the block grant of another, we must make a small contribution by making the information available in all quarters about what is happening. That is all that the amendment seeks to do.

5.15 p.m.

Mr. Fairbairn

This amendment raises some fundamentally important principles. I do not think that as a House of politicians we should overlook the fundamental schism which a block grant inevitably will create.

It is the stated policy of the Scottish National Party to create an independent State in Scotland, and it is its political intention to use the Assembly by whatever means it can—fair or foul—to achieve that aim—

Mr. Crawford

Not foul.

Mr. Fairbairn

The hon. Member for Perth and East Perthshire (Mr. Crawford) says "Not foul", but Scottish nationalists imagine all means, however foul, are good. They imagine that the end justifies the means and that the means are sanctified by the glorious end that they seek. Therefore their views are clouded as to whether the means are foul.

As the hon. Member for West Lothian (Mr. Dalyell) said, nothing will be easier than to persuade the Scottish Assembly of Scottish deprivation. The Scottish National Party trades on what I would call the deprivation factor. Nothing is easier than to persuade someone in Scotland that he is not tall enough or heavy enough, or that he is too tall or too heavy, or that he is different or deprived for some reason. That is a very unfortunate factor. It is the syndrome of the small man, and it is an anxiety fear, which I regret, because in Scotland it has done so much to export our best people to countries where the syndrome, fear and jealousy factor do not apply.

Let us imagine a Scottish Assembly controlled by Scottish nationalists. Whatever their disparate political feelings may be they are members of a suffragette movement—all interested in one ultimate aim. They will ask one another "What priorities will enable us to bribe the electorate of Aberdeenshire, or Fife, or the Central Belt or the great conurbation of Glasgow and its surrounding satellite towns?" I see this as an Assembly which could easily expend its block grant, be it raised on the basis of the Goschen formula of a ratio of 1 to 11 of the population, or by public expenditure in Scotland, or by public income in Scotland per capita, or any other basis.

Let us remember—and this is all too often forgotten—that of all the Scotsmen living in Britain more than 50 per cent. live in England. Of all the people who live north of the Tweed 50 per cent. are not Scots in any ethnic sense. This is not a great national or racialist conflict. It is merely a situation in which one political party wishes to take a geographical piece of land with some sort of historical echo, and make that the part in which it has its fancy influence.

Mr. Crawford

What has all this got to do with the amendment?

Mr. Fairbairn

I appreciate that the hon. Member for Perth and East Perthshire may not appreciate what this has to do with the amendment. It has a great deal to do with the amendment, but he is not a person of such intellect that would enable him to apreciate that it is important to understand that with a party which trades on jealousy and comparisons of deprivation nothing would be easier than for the Assembly controlled by that party so to spend the block grant that it could persuade the electorate that, having done so, there were major areas of deprivation created by those who were not resident within Scotland.

Mr. Crawford

Would the hon. and learned Member assist the Committee by letting us know whether he will be forcing a Division on the amendment?

Mr. Fairbairn

I do not think that it would assist the Committee to advise it so. However, I realise that the hon. Member's brain processes are such that he requires an awful lot of notice to take up a position himself.

The hon. Member for East Kilbride (Dr. Miller) said that Scotland might be better governed and might spend less money on some services. One thing has not been sufficiently appreciated. The Civil Service that exercises such massive power over the Scottish Office in London and that needs such devolution amounts to just over 70. The Civil Service that will be so careful with money under the Assembly in Edinburgh already totals nearly 13,000 people. With all respect to their virtue, I take the view that civil servants spend money and have an interest in so doing. Their numbers are not unrelated to the resultant expenditure thereby caused.

It is important that those who provide the money should have some call on it, unless this is to be the schism which is deliberately and politically allowed to enable those north of the border always to cry "Foul. We have been done down. It is not fair."

I mean no disrespect to the hon. and learned Gentleman the Minister of State. I apologise—he is not yet learned; he is learning, but is not yet there. It is fundamentally obscene that a Bill which so affects the constitution of Great Britain should be put through the Committee by a Minister who is not in the Cabinet. We had a fleeting visit from the Leader of the House, but the Government dare not let him open his mouth because they know that he could not win the argument. The right hon. Gentleman does not believe in the argument and the Cabinet is cynical about it. Therefore we are foisted with the Minister of State.

Mr. Dalyell

Is not the real truth of the matter that the Leader of the House might be tempted to make the argument extremely interesting and revealing? Of course it suits the Government to have an extremely able criminal lawyer putting forward the narrowest of legal points. If the Bill is taken on very narrow legal issues, it becomes much easier for the Government, but out of every clause there sprout important wider issues which we should be debating.

Mr. Fairbairn

I agree with the hon. Gentleman, although, having had the Minister of State as my junior, I cast doubt on whether he is a clever criminal lawyer.

It is serious and important that on so major a point as the amount of money which is to be given to Scotland and spent without accountability to this House, the member of the Cabinet in charge of the Bill is not even here to listen to the argument. He has no intention of arguing the case for the Bill. There is no Cabinet representation in the Chamber. I have just noticed the Secretary of State for Prices and Consumer Protection on the far end of the Government Front Bench, but it is extremely unlikely that he is interested in this matter. I dare say that he is here just for a quiet free seat. It is a scandal that the Leader of the House does not bother to lead the debate and try to convince us of what he says is an important argument.

Mr. William Small (Glasgow, Garscadden)

I should like to comment on the absenteeism and the escapology of the sages of the Tory Party on this amendment. All the important names are missing from the amendment. It has been left to a few lightweights to introduce this matter.

The Leader of the Opposition was in Scotland during the recess and I am surprised that she did not go to Edinburgh. I believe that Edinburgh will become the Athens of the North. Great and high debates will take place there. Every time poets write poetry, they look for the soul of a matter. The economic matters behind this argument mean nothing. The search for a soul in the rôle of the Scottish Assembly has my full support.

During the recess I was flying about with a fast cat. The right hon. Member for Sidcup (Mr. Heath) will know what I am talking about. "Fast cat" does not refer to the Leader of the Opposition. It is a catamaran.

Mr. Gow

The Committee has listened to a most extraordinary speech by the hon. Member for The Wrekin (Mr. Fowler). We must count ourselves fortunate that the hon. Gentleman no longer occupies the place of the present Minister of State, because he seemed to be telling us that it was no concern of the House of Commons or of hon. Members what happened to money once it had been voted by this House.

That is a most dangerous and frightening proposition. It came from a man who tells us that he is a Socialist, and who used to be a Minister in a Socialist Government. He said that once money had been allocated to the Scottish Consolidated Fund under the provisions of Clause 42, it was no concern of the House of Commons how it was spent. It is of the closest importance and interest to the House to know what is done with the money that we vote. That is the purpose of the Public Accounts Committee. The amendment is modest, but it should be supported by the Government and the Committee.

The Explanatory and Financial Memorandum says that Part IV of the Bill and the related Schedule 9 contain the main provisions for financing devolved services and for ensuring that expenditure on these services is subject to appropriate scrutiny. That is manifestly not the case.

The Minister of State should welcome with open arms an amendment which provides that the Secretary of State should lay before the House of Commons the accounts of the Scottish Consolidated Fund and the Scottish Loans Fund. Unless it is presented with those accounts, how can we decide what sums should be allocated for the following year? What could be more reasonable or more in accordance with our existing practices, however inadequate, for controlling public expenditure than that the accounts of both funds should be laid before the House?

It is astonishing to find in Clause 57 that the accounts have to be laid before the Assembly which will not have provided one penny of the hundreds of thousands of pounds that the House will be allocating to the funds each year. It is incongruous that the body that will have no hand in raising the money but will decide only how it should be spent should be entitled to receive the accounts and that the House should not be so entitled.

Although the amendment is modest, it is at least a step in the right direction and it does something to assert that the supremacy of the House over expenditure, even that which it has approved, must be continuous and that we must continue to have the right to investigate how the money which has been allocated has been spent.

5.30 p.m.

Mr. David Crouch (Canterbury)

I cannot agree with my hon. Friend the Member for Eastbourne (Mr. Gow), who put forward a reasonable argument for accepting the amendment, that the amendment is modest. It is anything but modest. It is absolutely crippling to the Bill. The confederates of the South who sit around me do not like devolution at all. I refer to those who have put their names to the amendment. I do not share their views.

I may be absolutely wrong in believing that devolution or a movement towards Home Rule for Scotland in some form or other is a good thing. In future I may be judged and found to be wrong. Indeed, I may see that I was wrong. But that is not how I feel today, or have felt over the last year when we have been considering this problem.

I believe that devolution of financial responsibility is an essential part of the Bill because, without it, there is no devolution for Scotland—not even a quarter step towards Home Rule for Scotland. The United Kingdom Parliament is giving no measure of devolution whatsoever to Scotland if it is not prepared to devolve some measure of control over the financial activities of the Scottish Assembly and the Scottish people.

Mr. Dalyell

I listened with interest and respect to the speech made by the hon. Gentleman in December, and he has again raised the same point. What does he mean by "Home Rule"? Does it go as far as a separate State? This is the second speech in which the hon. Gentleman has said that he is in favour of Home Rule.

Mr. Crouch

It would appear to be a phrase that the hon. Member for West Lothian (Mr. Dalyell) dare not allow to come from himself. I believe in Home Rule for Scotland. That is the ultimate aim, and this is a step towards it. I see this as a positive step. I see it not as separation but as devolution to a clearly identifiable part of the United Kingdom. I see it as a measure which will strengthen, not weaken, the United Kingdom. If we do not soon pass legislation reflecting devolution for Scotland, we shall be sowing the seeds for weakening the United Kingdom.

Mr. Fairbairn

Rubbish.

Mr. Crouch

My hon. and learned Friend may call it rubbish, but I feel passionately about this subject. I have already admitted that I may be wrong. I give way to my hon. and learned Friend.

Mr. Fairbairn

I am obliged to my hon. Friend for the important tartan views coming from the garden of England. I wonder whether he could give me some advice on one matter. If the Scottish Assembly were to come back to the House of Commons and say We are terribly sorry, but we have used up the block grant and we have no money for building council houses, hospitals and roads", on what basis would the House consider its application for more money if there is no accountability such as that which the amendment suggests?

Mr. Crouch

I think that my hon. and learned Friend has forgotten that we practise devolution in the management of our national affairs in many areas. For example, there is devolution in the National Health Service. There is devolution from the Secretary of State for Social Services to the regions in England and Wales. Under such devolution it is possible for a region to decide to close certain hospitals and to assess priorities differently from other regions. There is no question of the Secretary of State stepping in and saying "You are doing it all wrong. I am running this show." In the last resort, he can do that. However, we trust those who administer the National Health Service to carry out measures of devolution.

The question before us relates to giving the Scottish Assembly the right to control and audit the finance made available in the form of a block vote. Why should we assume that an elected Assembly with an Executive is incapable of controlling and auditing its own expenditure? We have heard many terrifying stories this afternoon of what might happen as for example, that the Scottish Assembly might decide to cease to charge rents for council houses. That is a ridiculous statement.

Mr. Sproat

I accept that my hon. Friend does not necessarily share the view of those who believe that a Scottish Assembly—even a Socialist Scottish Assembly—would be spendthrift. We are talking not only of the good old Labour Party and the good old Tory Party, but of a Scottish Assembly which would possibly contain the Scottish National Party whose sole object is the break-up of the United Kingdom. Therefore, it would be likely to use every financial measure, including over-spending, to make the Executive go back to the British—or, as the Scottish nationalists would call it, the English—Treasury to ask for more. If the application were refused, they would say "Look how the impossible English are stamping on the poor Scots." That is the kind of situation that we envisage in addition to being spendthrift.

Mr. Crouch

In those circumstances, I should fall back on a quotation from Lord Randolph Churchill and say "Trust the people." I would trust the Scottish people, the electors, not to allow such a ridiculous situation to arise.

Mr. Sproat

But it might.

Mr. Crouch

It is a matter of conjecture which I am not prepared to accept. It is possible that those who represent the Scottish National Party in a Scottish Assembly will behave with absolute irresponsibility and believe that they can come back here, if they have a majority, and say "We have mismanaged our affairs, and something must be done." Perhaps we shall hear how the Minister of State would cope with such a hypothetical situation. I am not in a position to answer my hon. Friend the Member for Aberdeen, South (Mr. Sproat). I acknowledge that he knows more about the Scottish situation than I do representing a constituency in the south-east of England.

I am prepared to accept that an elected Scottish Assembly, backed by a duly appointed Executive, can be as efficient in administering its affairs as this Parliament, backed by its civil servants, in administering United Kingdom affairs.

The Executive in Northern Ireland under the old Stormont Government was capable of managing its affairs. As a member of the Public Accounts Committee since 1973—since direct rule—I know of the efficient management, control and audit of expenditure in Northern Ireland by the Northern Ireland Exchequer and Audit Department, which now reports back to this Parliament and to the Committee on which I have the honour to serve. I have been most impressed by the efficiency of the members of the Exchequer and Audit Department in managing Northern Ireland's financial affairs. I make no comparison with the Comptroller and Auditor General's Exchequer Audit Department for the United Kingdom, whose work I know well, but the Northern Ireland Exchequer and Audit Department is no less efficient.

I make these brief remarks to illustrate that we shall not be embarking on a grave course if we do not accept the amendment.

Mr. John Stokes (Halesowen and Stourbridge)

One feature of these debates—I have attended nearly all of them—has been the lack of support for the Bill. My hon. Friend the Member for Canterbury (Mr. Crouch) is only the second Member today—I think that there was one Labour Member—to speak for the Bill. I represent an industrial area in the Midlands. I think that I am safe in saying that 95 per cent. of my constituents would disagree with my hon. Friend.

I have recently been looking at some of the surveys that have been carried out on this subject. There was one not long ago in the Sun newspaper, which showed that only 6 per cent. of the population of the United Kingdom as a whole were in favour of the Bill. Since Government Members read the Sun more regularly than I, no doubt they will recognise the truth of my words.

We have had a fascinating debate this afternoon. It shows how dangerous and muddled is the Bill, and how many pitfalls it will lead us into. I am pleased that we have had a long debate on the amendment, but the situation is scandalous because the guillotine will ensure that many important clauses will not be discussed. That will place a heavy burden on the House of Lords when it considers the Bill, if it is granted a Third Reading by the House of Commons.

We have been considering the question of money to be granted in the form of a block grant by the United Kingdom Parliament to the Scottish Assembly. Few people in England as yet realise what is involved. Most people believe that the power to spend taxes should not be granted to those who have no power to raise taxes. That is one of the fatal flaws in the Bill. Since it will have no responsibility for raising money, the Assembly is bound to claim more money to spend. That is only human nature, but it is bound to cause increasing friction between the United Kingdom Parliament and the Scottish Assembly.

What worries me is that in granting the Assembly these unparalleled powers, which are unknown in our history, we shall make that Assembly not subordinate to this Parliament but in many respects equal to it. That matter was raised in an important article in The Times recently.

The money to be spent by the Scottish Assembly will not be money raised from the Scottish people but taxpayers' money raised from the people of the whole of the United Kingdom. We complain, as we did yesterday, that we do not have nearly enough control over the money spent by the Exchequer here. How much more important it is, then, that we should control the money that is to be spent by the Scottish Assembly—money which we have raised and then granted to it en bloc. There is a feeling in many parts of England, and certainly in the Midlands where we have seen many factories and industries taken away from us and moved to Scotland, that the people of Scotland, under the present United Kingdom parliamentary arrangements, already have more than their fair share of the national cake. The danger is that under this clause Scotland will claim even more largesse than it does now. The English people, who have been remarkably long-suffering, as they gradually begin to understand what is being said in the debates in this Committee—although, unfortunately, very little is reported in the newspapers—will ask themselves why they should have to subsidise people and pay extra taxes just because those people happen to live in Scotland. My constituents are already asking me that question.

The Government have not yet given an answer to that question. They cannot answer it, because the Bill is a result of a political decision the purpose of which is to stop the SNP from catching Labour seats in Scotland. Whether the Assembly is SNP or Labour dominated, the Government's intention is to see that more United Kingdom taxpayers' money is allocated to Scotland. That is wrong and unfair, and hon. Members should realise that.

All Back Benchers have a duty to control and curb the Executive, and, above all, to watch how public money is being spent. In the space of two and a half hours this afternoon, we shall, if the clause is passed, give away a great part of our powers of control. That is funda- mentally opposed to our duty. It is an absurdity for the 71 Scottish Members to remain here when they are not able to carry out the most important job of keeping a check on the use of money that is voted to the Scottish people.

545 p.m.

Mr. Pym

Although this amendment is not of itself immensely weighty, it has given rise to substantial debate about the financial provisions in the Bill and particularly about accountability. To that extent it is important. A series of doubts and anxieties that arise out of the financial provisions in the Bill have been expressed in the debate.

I do not believe that the greatest defect of the Bill lies in its financial provisions. I am still of the view that the greatest defect remains the Bill's effect upon England and the House of Commons. Nevertheless the financial provisions will, I regret to say, provide a further source of conflict. They will create political pressures that may be found to be unacceptable.

My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) used the word "blackmail". I hope that that is too strong a word, but we could get into difficulties that might fit that description. We might find that there are tensions and dissensions arising from these provisions which are derived from the type of devolution provided for in the Bill. We might find that we have a separate Scottish Cabinet and separate Scottish Assembly with wide executive and legislative powers. We might find that the Scottish Assembly and Executive are not subordinate to the House of Commons but are a rival democratic Assembly.

Mr. Dalyell

The right hon. Member talks about a rival democratic Assembly. Before Christmas, I inquired about whether he and his hon. Friend the Member for Cleveland and Whitby (Mr. Brittan) had made up their minds whether they wanted an Assembly at all. If they want an Assembly, it will be a rival democratic institution. Have they decided whether they want an Assembly?

Mr. Pym

I shall answer the hon. Member for West Lothian (Mr. Dalyell), although he will not like my answer. He and I and my hon. Friends share a dislike of the Bill. But the hon. Member for West Lothian and many other hon. Members in all parts of the Committee are against any Assembly of any kind. They do not feel that an Assembly has any contribution to make at any time to Scotland. I and others have held the view that an Assembly could have an important rôle in Scotland, but we have never proposed an Assembly which remotely resembles that which is contained in the Bill.

We have proposed an Assembly which is far less far-reaching than the one proposed by the Government. Equally, we have acknowledged that there is no more a majority in the House of Commons or in Scotland for that Assembly than there is for the Assembly which is proposed in the Bill. I accept that it has been given a Second Reading, but I do not accept that the House of Commons genuinely wants it.

There have been arguments and discussions. The Government have ploughed on with their determination to railroad the Bill through Parliament. In doing that, certainly, I believe, against the spirit and wishes of the House, they have created a position of the utmost confusion. Worse, they have created a situation of the utmost danger to the continuing unity of the United Kingdom.

It is for those reasons that I have argued consistently—I think that the hon. Member for West Lothian will acknowledge that I have at least been consistent in this as he has been in his policy—that we are setting about it here in the wrong way. I have said that in my view the United Kingdom Parliament is letting down the United Kingdom, which we are here to represent, by the manner in which the subject has been handled. That does not give the hon. Gentleman the specific answer he wants, but it indicates to him not only how I believe we should proceed but why we should proceed in that way.

At no time has any of my right hon. or hon. Friends proposed an Assembly that could lead to the very complications that I was about to describe that flow from the Bill or the conflict that will come about with a separate Scottish Government and Assembly which have separate powers from the House of Commons. That is the background of the view we have taken about it and why I say we have never proposed an Assembly which would lead to the difficulties that I have criticised about the Bill. I think that the hon. Member for West Lothian and I are at any rate united on that point.

May we now return to the question of the financial provisions and the amendment? I was saying that the creation of that separate Executive and register will create expenditure demands in Scotland which will be decided by the Scottish Cabinet but which the Scottish Cabinet and Executive will not pay for. The United Kingdom Parliament will provide the money, but it will not be able to control how the money is spent in Scotland.

Paragraph 101 of the White Paper "Our Changing Democracy", Cmnd 6348, states: Accountability for the expenditure will run not to Parliament but to the Assemblies. I am afraid that that means that the point that my hon. Friend the Member for Aberdeen, South (Mr. Sproat) made about the Public Accounts Committee does not and is not intended to apply. But it is necessary that there should be accountability, and from that point of view it was entirely right for him to move the amendment.

Paragraph 102 of the White Paper states: The Scottish administration will have the fullest possible freedom to decide how the money from the block grant should be spent … this is a major economic as well as social power. It will give the administration a powerful new instrument for shaping developments over a wide range of services. It is in that spirit that the Bill has been designed. The Government try to imply that the negotiation over the block grant with the Scottish Executive will be fairly straightforward.

The same White Paper states in paragraph 105: With understanding"— whatever that word may mean in this context— on both sides agreement should usually be reached. It goes on to say that if it is not reached the House of Commons must take the final decision. But think of the politics of it. Think of the political parties competing in Scotland. It is bad enough here when we raise the money and have responsibility for taxing the people. But how much worse will it be when the authorities in Scotland will be spending someone else's money?

The hon. Member for The Wrekin (Mr. Fowler) visualised a Government of one colour at Westminster and a Government of another colour in Scotland. He was right to do that. Imagine a Socialist Government in Edinburgh. They could be assumed to be likely to carry out a programme of more public expenditure and more taxes. But what if there were a Conservative Government at Westminster pursuing a policy of less expenditure and less taxes? Would that situation be accepted without question? I think not.

What about the vice versa position? Would there be any point in a Conservative Scottish Cabinet reducing expenditure if a Labour United Kingdom Cabinet were hell bent on keeping taxes high? The only result would be that the Socialist Government would have more money to spend elsewhere than Scotland. If the SNP were in power in Scotland, there would be a different result too. This means that the harmony and co-ordination which has always been an important part of our government throughout the United Kingdom will often be difficult to achieve.

What control does the Minister think he will have over the Scottish Government's capital expenditure? Capital expenditure programmes involve continuing revenue demands. If the Scottish Cabinet legislates, as it is entitled to do, to expand and extend public services, will it be able to claim an extra block grant on the basis of need, or will the United Kingdom Government insist that if they legislate to extend one service they must reduce the demand for money for another? Yet under the Bill the United Kingdom Government will have no power to do that.

We are talking here of large sums of money. Table 3 of the White Paper "Devolution: Financing the Devolved Services", Cmnd. 6890, indicates that the total of public expenditure in Scotland on the devolved services approaches, on the basis of 1975–76 data, £3,000 million. Nearly £2,000 million of that has to be paid for by block grant. The precise amount for Scotland has to be decided each year as a matter of political judgment according to paragraph 99 of the 1975 White Paper. In paragraph 100 it states: No neat formula could be devised to produce fair shares for Scotland (and for England, Wales and Northern Ireland) in varying circumstances from year to year. The task involves judgments of great complexity and political sensitivity. It most certainly would in the form proposed by the Government. I am doubtful whether there is enough confidence between the parties across the Floor of the House for them to have much faith in that system or that there will be enough confidence between the two Administrations north and south of the border to make that a success. I agree that there is no neat formula, but equally there is no responsibility in the Bill for the people of Scotland and the Scottish Executive to raise money. What will be shown up in immediate relief is the difference and the discrepancy in the amount of public money going to different parts of the United Kingdom.

Scotland gets a higher share per capita than the other parts of the United Kingdom, as, of course, do many of the English regions. That discrepancy is based on need and it is a very important aspect of United Kingdom economic policy. It has been devised and carried through for the well-being of the whole of the United Kingdom. But when the extent of the discrepancy comes to be realised in England, as inevitably it will, will not jealousy and ill-feeling arise? Are not my right hon. Friend the Member for Renfrewshire, East (Miss Harvie Anderson) and my hon. Friend the Member for Cirencester and Tewkesbury right when they talk about resentment? That is the very thing we should be trying to avoid.

The hon. Member for West Lothian said that the parity question would be raised. That is inevitable and it is unfortunate, because up to now the basis of the allocation has been accepted throughout the United Kingdom. The basis has been for the general good of the whole country and it has been seen by the whole country as such.

Mr. Russell Johnston

I am not clear why the disparity should occasion such strong feelings if an Assembly were created when it does not create strong feelings now when the same disparities exist.

6.0 p.m.

Mr. Pym

The subject will be drawn far more vividly to public attention. It will be a matter for discussion between the two Governments. It will become a matter of great public debate. The figures will be analysed and the British people will want to know the facts and figures. They will be entitled to know them. They are entitled to them now, but since the whole of the United Kingdom is governed by this Parliament the problem does not arise. Under the Bill, however, the arrangements will be different and the discrepancies will be brought to everyone's notice. They will give rise to the kind of ill feeling about which we have been talking throughout the whole passage of the Bill. It is the very thing that we ought to be avoiding. It is one of the most fundamental reasons why we on the Conservative Benches are so opposed to the Bill.

My fear is that, added to all the other disputes and arguments that will arise, the financial provisions may prove to be unacceptable or unworkable. After the demise of the Scotland and Wales Bill, the Government changed their mind to some extent about the financial provisions. They talked about creating an independent advisory body to collect and collate information and for determining the block budget over a period of years. Neither of those things is in the Bill, but even if they were they would not deal with the main criticism, which is that there is no responsibility for revenue raising.

About a year ago, the Leader of the Liberal Party said something about this. On 13th December 1976, the right hon. Gentleman said: To have representation without taxation, and to have the block grant principle decided at Westminster, is a recipe for conflict"—[Official Report, 13th December 1976; Vol. 922, c. 1020.] That was the right hon. Gentleman's view then. I do not not suppose that he has changed it since, though he may have had to bend it a bit.

However that may be, there is certainly no incentive on the Scottish Executive not to spend the whole allocation of its money. It it were to over- spend it, as far as I can see the only people who could come to the rescue of Scotland are the British taxpayers.

Mr. Buchan

Surely the logical consequence of almost everything that the right hon. Gentleman has been saying is that the Scottish Assembly should be given tax-raising powers. Does he agree with that?

Mr. Pym

As I said at the beginning—I shall return to it shortly—the whole problem with the financial provisions in the Bill arises from the type of devolution, to which we have been opposed. The one is the consequence of the other. The absence of revenue-raising powers puts the Assembly in what seems to be a less responsible position than that of local authorities. The Layfield Report, as we know, came to the conclusion that local authority independence required a local source of revenue, and the Government appear to have accepted that, but they take a different view about the Assembly.

That leads me to another point that I should like the Minister to mention. It seems to me that the Scottish Cabinet will decide how much of the block grant will be distributed to the local authorities. As far as I can see, they do not have to distribute all of it. Is it not conceivable that they could decide to retain, say, £200 million out of the £1,000 million, approximately, that the rate support grant now amounts to and distribute only £800 million, keeping the rest? Is that not a kind of disguised way in which they could raise some tax revenue of their own?

Mr. Mackintosh

Does not the right hon. Gentleman also appreciate that they could raise charges? There are other ways in which they could raise revenue in that sense. To mention not having tax-raising powers is selecting just a single area which is being denied them.

Mr. Pym

I am grateful to the hon. Gentleman for that intervention. But it is an important matter. Those of us who represent county constituencies in England—I speak for myself and a number of my hon. Friends—know very well what politics can do to the rate support grant.

I do not wish to elevate the tax-raising powers to a major matter of principle. Local authorities have them. I think that the provincial governments of all federations have them, even if they are not used. The Assembly, apparently, is not to have them.

What we are dealing with here is the anomalous creation of a semi-federal arrangement for Scotland in what I think I must say would become a semi-unitary State in the rest of the United Kingdom, and the consequences and implications of that. Any kind of federalism or semi-federalism requires financial provisions to be made, and the exact nature of those arrangements depends on the circumstances in each case. For example, different arrangements are made in Canada, Australia and Northern Ireland, but with revenue-raising powers in each case, though they are not always used. In Northern Ireland over the years there grew up a practice of an entirely different kind.

The problem with the Bill is that it will create an entirely separate Scottish Executive which is to be invested with total control of public expenditure to be paid out of moneys they have had absolutely no responsibility for raising. They will control public expenditure provided by someone else. That is the importance of the amendment and the accountability aspect. That will prove unsatisfactory and possibly even disruptive. I observed in The Times on Friday that Mr. Bogdanor had expressed the opinion that the financial arrangements in the Bill constitute the most serious source of instability in the new pattern of government in Scotland. I do not think that it is the most important source, but it is certainly one of the most important.

The whole difficulty arises because the Government have approached devolution and the Bill not on the basis of bringing about a general improvement in government but to suit their party-political ends. They decided on a solution first and then bent all the pieces to fit that solution, including the financial provisions and the retention of 71 Members of Parliament with the same role, because that is the point of the exercise. They were unwise in approaching the matter on that basis, as they were unpatriotic. The Bill cannot work or last. The financial provisions will make their own unhappy contribution to the unworkability of this form of devolution.

Mr. John Smith

The right hon. Member for Cambridgeshire (Mr. Pym) went a little wider than the terms of the amendment. I am not surprised by that, because he rather damned the amendment with faint praise. He said that it was not immensely weighty. In the language that the right hon. Gentleman is accustomed to use, that could be translated to mean "without much merit". He has the great difficulty of dealing with the "ultras" who sit behind him. He has to be reasonably polite, because they are of the same party, although he often disagrees with them.

Mr. Pym

I said that the amendment itself was not weighty but that it led to very important debate about the financial provisions and the whole accountability aspect. I am sure that the hon. hon. Gentleman will wish to be fair.

Mr. Smith

I was trying to be fair to the right hon. Gentleman and to his hon. Friend the Member for Aberdeen, South (Mr. Sproat). I was seeking to distinguish the right hon. Gentleman's contribution from the contributions of others. I am being more than fair to him, perhaps, in that regard, when one considers that he accuses us of being unpatriotic. That was an uncharacteristic lapse from the standards of debate to which he normally aspires.

The right hon. Gentleman took us very wide. When the Committee says later tonight that we have not reached certain clauses, we have to bear in mind that the number of clauses that are reached is dependent on the amount of time that we spend on them. It is entirely up to the Committee to decide whether we spend a lot of time on Clause 42. It is also up to the guillotine, although that is very generous. There will be a large number of days for discussion of the Bill. In all, it will be discussed for 14 days in Committee. That is apart from the Second Reading debate. Also, there will be three days for Report and Third Reading. Therefore, it is a very generous allocation of time. I ask the Committee and those who comment on our proceedings to bear in mind that if we spend a lot of time on certain clauses—and I am not in control of the amount of time the Committee takes to deal with these matters—we shall have less time for other matters.

That may be why the right hon. Member for Cambridgeshire sought to go much wider. Although what he said was interesting, I shall try to answer the points made by the hon. Member for Aberdeen, South and others, because my principal obligation is to them. However, I do not ignore what the right hon. Gentleman said.

The right hon. Gentleman accused the Government of having hit upon a form of government which would cause conflict, would be unstable and would be unworkable. As I understand it, he believes that the main reason why the form of devolution contained in the Bill is so retrograde is that it implies executive devolution and legislative devolution. I deduce from that that the only form of devolution that would be acceptable to and worthy of commendation by the right hon. Gentleman and his colleagues would be a form of devolution that would be neither executive nor legislative. The mind boggles at what sort of devolution that is. Are we to have an Assembly which has neither executive nor legislative power? This is supposed to be an Assembly that will contribute something worth while to the government of Scotland and of the United Kingdom. Is it to be purely advisory?

The right hon. Gentleman drew a distinction between the views he says that he has held consistently over the years and those of other members of his own party and others who are completely opposed to the principle of devolution, such as my hon. Friend the Member for West Lothian (Mr. Dalyell). It was not I who drew that distinction. It was the right hon. Gentleman himself who was very careful to draw it. He said to my hon. Friend the Member for West Lothian, "Do not accuse me of being against devolution in principle. I am in favour of devolution in principle"—albeit neither executive nor legislative. I think that that is a fair summary of the right hon. Gentleman's view on this matter.

Of course, some people have had some time to think about the matter. In 1968, I think, there was the Declaration of Perth on the setting up of a Scottish Assembly. What has happened? What have the right hon. Gentleman and his colleagues done to develop the thinking on devolution, a principle to which the right hon. Lady the Leader of the Oppo- sition says she is passionately attached? I think that she said that in a speech in Glasgow yesterday. What has the Conservative Party done since 1968? Absolutely nothing—except to call for a conference, in which it might find some ideas coming from other people, not from itself. The right hon. Gentleman has never said what the Conservative contribution to a constitutional conference would be. What would be the input from the Conservative Party to such a conference? From its record to date, and from the statement on devolution offered in this very Committee this afternoon by the right hon. Gentleman, the answer is absolutely nothing.

In regard to the development of policy for something which is approved of in principle, the cupboard in the Conservative Party is bare. That is all the more reason for it to attack the provisions of the Bill with relish. The Conservative Party thinks that in attacking the Bill it can escape from the responsibility of saying what it would do.

That sort of approach is all right for the hon. Member for Aberdeen, South and for my hon. Friend the Member for West Lothian and all the Bourbons and ultras on whatever side of the House, however they may choose to describe themselves. We know that they are totally opposed in principle to devolution, and the logic of their position can be followed, but it is not good enough for the right hon. Member for Cambridgeshire and the Conservative Front Bench especially in the light of what was said in "The Right Approach": I gather that that is still the gospel of the Conservative Party policy. No amendment has been issued to contradict it. Nothing has been changed, and, therefore, we must take it that the Conservative Party is committed in principle to devolution of a kind which it cannot describe. That is the position at the moment, and during the whole course of the Committee there has been no development of the Conservative Party policy on devolution. There has been nothing except criticism.

Our view is that devolution, to be meaningful, must be both executive and legislative, and that if we are to ask people to serve in a Scottish Assembly it must have considerable power over those affairs which affect Scotland primarily and directly. Other matters, which affect the whole of the United Kingdom, such as energy, trade, defence, the general economy, industrial policy and industrial relations, should continue to be controlled by the United Kingdom Parliament and the United Kingdom Government.

When people ask what would be the role of Scottish Members of Parliament after devolution, I am bound to point out that if 71 Scottish Members cannot find enough matters in which to interest themselves, in a Parliament which is dealing with energy, defence, foreign affairs, trade, industrial relations and so on, that is really surprising.

The amendment proposes that there ought to be superimposed upon the Scottish Assembly an accountability to Parliament. It cannot just be that the supporters of the amendment want the accounts to be published. The accounts will be published and will be obtainable by Members of the House. The point of having a requirement that the Secretary of State shall lay accounts before Parliament is, I suppose, that Parliament might take an opportunity to debate them. There would, therefore, be another line of accountability from the Scottish Executive to the House of Commons. I think that that would be disastrous. We must have clear lines of accountability when we are engaged in devolution.

The Secretary of State will, of course, be accountable to the House of Commons for the payments made under Clause 46 and the capital payments made under other clauses of the Bill, but in the expenditure of that money the responsibility of members of the Scottish Executive should be to the Assembly from which they spring. There should not be another line of accountability to the House of Commons. I think that that would lead to total constitutional confusion and disaster because, having taken the decision to go for devolution and to set up an Assembly and give it substantial and meaningful powers, we cannot then say that it is to be subject to the apron strings of continuing parliamentary control over the details and the exercise of those responsibilities. My hon. Friend the Member for The Wrekin (Mr. Fowler) put the matter with admirable succinctness when he said that not only would it be a hobbling apron string but one applied in restrospect. That would not be an enhancement of accountability from the point of view of the House of Commons or those who serve the Assembly, either as members of the Executive or in the Assembly itself.

I do not think that the amendment will advance any cause. It is interesting that it is brought forward by those who are totally opposed to devolution. Their policy during the sittings of the Committee has been to try to put a spoke in every wheel and to raise an issue of principle on every amendment, rather than to try to make the Bill more workmanlike. If that is their choice, I respond to it in these terms, but perhaps from time to time we might have some more constructive consideration of the detail of the Bill.

6.15 p.m.

The hon. Member for Canterbury (Mr. Crouch) at least had a clearer idea of what is involved in devolution than his right hon. Friend the Member for Cambridgeshire. The right hon. Gentleman should talk to his hon. Friend from time to time. No doubt the right hon. Gentleman's attitude is affected by his membership of the Shadow Cabinet and by the other forces with which he has to deal there. It would appear that sometimes the discussions between the right hon. Gentleman and his hon. Friend the Member for Glasgow, Cathcart (Mr. Taylor) on the question of devolution are rather difficult, whether in the Shadow Cabinet or elsewhere. I sympathise with anyone who has to be a colleague of the hon. Member for Cathcart, whether it be on devolution or on other issues.

My hon. Friend the Member for Aberdeen, North (Mr. Hughes) mentioned the question of Scottish Nationalist propaganda concerning the development of oil resources. I did not hear what was said about that, but it is a quite ridiculous and disgraceful allegation that has been made. My hon. Friend will bear in mind that, post-devolution, he can seek to correct such matters from here, because energy is not to be a devolved matter. The House of Commons will continue to be responsible for oil, and he will be able, therefore, to pursue the Scottish Nationalists on that matter in the House of Commons. He need not fear that devolution will inhibit him from putting forward his point of view on it.

Mr. Dalyell

If it is true that the House of Commons is to be wholly responsible for oil, then by definition the Members of the Scottish Assembly cannot conceivably be satisfied with their rôle.

Mr. Smith

I cannot see why they should not be satisfied with their rôle, because the clear principle is that there is to be devolution of the Assembly—[Interruption.] Laughter is not a substitute for argument and we have not had much from the Conservative Front Bench in the way of argument. The only body which can give power to the Assembly to control anything is this Parliament, and the powers which are given in the Bill are carefully defined.

There was a very good reason why energy is not made a devolved matter. The reason is that it is a United Kingdom matter affecting the whole United Kingdom, and it is, therefore, better that the British Parliament should have responsibility for it. It is quite a different matter from for example, Scottish education, which is already separately administered from St. Andrew's House, and of concern only to those affected by it. These matters are part of the ABC of devolution. There is a clear distinction between the two subjects, and that line has been followed through the whole course of the Bill.

Mr. Dalyell

But the ABC of politics in Scotland as some of us see it—I do not presume to talk for everyone—is that the issues which have given rise to the Scottish National Party are much more concerned with oil than with educational change.

Mr. Smith

I am not sure about that. It was said earlier that one of the issues was primary school teachers' salaries, and I raised my eyebrows slightly at that. Oil may be a factor in the matter but the major point that I am seeking to make is that there is a perfectly good reason for not devolving energy. It is that energy is a British matter. I adhere to that view, and I do not think that my hon. Friend the Member for West Lothian dissents from it. But he has a vivid imagination. I may be hobbled by the difficulty of being what he calls a criminal lawyer. I must say that it is a doubtful compliment, but, whatever I say, I am glad that I do not have the vivid imagination of my hon. Friend, and, indeed, the vivid imagination of some other hon. Members, one of whom suggested—it was certainly not my hon. Friend—that there were to be no council house rents payable at all in Scotland.

Mr. Dalyell

rose—

Mr. Smith

I said that it was not a point made by my hon. Friend. It was, indeed, an example used by an Opposition Member. That sort of thing goes completely beyond the bounds of credibility.

It is a reasonable assumption that the Assembly will be responsible for the way in which it conducts its affairs. The hon. Member for Inverness (Mr. Johnston) has frequently said that the Committee will not discuss the Bill satisfactorily or constructively if it does not deal at least with the assumption that the people elected to the Scottish Assembly will be reasonable and seek to discharge their responsibilities adequately to the electorate.

Mr. Fairbairn

This was a point that I raised. I do not think that the Minister of State should dismiss it as he has done. He will know perfectly well that Scottish Secretaries of State of both Conservative and Labour Governments have had to compel certain local authorities in the West of Scotland to raise their council house rents because, for totally political reasons, they have deliberately kept them at nominal values. It is that sort of political activity which could well be in the hands of those who wish to carry political favour in Scotland.

Mr. Smith

The hon. and learned Member is referring to the SNP. In my constituency the middle-class areas argue that rents should go up, and working-class areas argue that the rents should come down. I do not know what policy they would recommend should be followed in the Assembly. Most of my hon. Friends with constituencies of the same social composition know what I am talking about. With respect to the hon. and learned. Gentleman, I am not aware that the present Secretary of State compels any local authorities to raise their rents. That is a matter for the local authority itself to decide. It is a matter which the Minister for Housing and the Executive member dealing with it will have to decide.

I also do not accept the proposition about SNP domination of the Scottish Assembly. I have far too much confidence in the good sense of the Scottish people. I believe that they will elect Conservative, Labour or Liberal Members. I do not see them electing great hordes of SNP Members. If hon. Members are as fearful as that, then we shall not deal effectively with the SNP challenge.

The main burden of what the right hon. Member for Cambridgeshire said in the wider debate was that the financial arrangements would not work, but we have had no other suggestion whatsoever from him. I understand that he is not in favour of tax-raising powers for the Assembly. I therefore do not see how else the Assembly could be financed, unless it were on the basis of money provided by the United Kingdom Parliament. There are clear lines of accountability for that money.

The right hon. Gentleman is basically saying that we had better give up the task of getting devolution at all and that we must go back. He said that we cannot have executive or legislative devolution. Yet we have been given no constructive alternative. We shall come to tax raising later, when I hope to develop reasons why the Government feel it would not be suitable, over-expensive and cumbersome to have additional tax-raising powers. That is another matter. [Interruption.] Perhaps my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) can contain himself till we come to that debate. We shall then be able to debate the argument. I want to make progress, and do not want to move into that area immediately.

The main purpose of the amendment is to put another hobbling difficulty in the way of the work of the Assembly. We on this side want to see a Scottish Assembly that has the capacity and the power to carry out the responsibilities given to it. I believe that this is a great opportunity to exercise increased bureaucratic scrutiny and control over its affairs. I also believe—I am in total agreement with the hon. Member for Canterbury—that it will strengthen the unity of the United Kingdom rather than diminish it. Those people who are looking for imaginary difficulties, or conjuring up all sorts of difficulties, would do much better if they thought more seriously about the unity of the United Kingdom which they profess to wish to maintain.

Mr. Sproat

Many hon. Members who support the amendment find themselves in a difficult position. We think it is a useful and valuable amendment. We believe that the Government's financial proposals are one of the major causes of instability in the whole devolution Bill. As always, we are struggling under the confines of the guillotine, but in addition to the normal confines of the guillotine we shall have an extra debate today on an amendment to be moved by the hon. Member for Berwick and East Lothian (Mr. Mackintosh). We consider that this has been an extremely valuable debate. Therefore, in the interests of progress, and in spite of all the other factors, including the unusually naïve speech from the Minister of State, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Mackintosh

I beg to move Amendment No. 543, in page 21, line 9, at end insert: The Scottish Consolidated Fund shall have three sources of revenue—

1. (a) the proceeds of personal income tax levied upon Scottish residents as set out in Schedule (Income Tax in Scotland) and collected by the Inland Revenue. The Scottish Assembly may reduce the rates at which this income tax is levied;
2. (b) fifty per cent. of the proceeds of assigned excise taxes levied in Scotland. The assigned excise taxes are tobacco duty, alcohol duty, the duties on hydrocarbon oils and the duties on betting and gaming. The administration and collection of these taxes will continue to be the responsibility of the United Kingdom Customs and Excise and the Scottish Assembly will have no power to alter the rate of these taxes;
3. (c) an equalisation payment from the Treasury which will be authorised by the Chancellor of the Exchequer if the receipts of personal income tax and the half share of the assigned excise taxes are together more than 10 per cent. short of the Scottish proportion of public expenditure. In calculating whether a shortfall takes place, personal income tax will be assumed to be levied at the U.K. standard rate. The Scottish proportion of public expenditure will be that sum which stands in the same relation to each year's U.K. public expenditure as the sum spent on the total of devolved services stands in relation to U.K. public expendi- 1509 ture in the year in which this Bill is enacted. If the sums raised by personal income tax (again calculated at the standard U.K. rate) and the half share of the assigned excise taxes are together greater than the Scottish proportion of public expenditure by ten per cent. or more of that sum, the surplus will be paid from the Scottish Consolidated Fund into the Treasury.".

The First Deputy Chairman (Sir Myer Galpern)

With this we may take Amendment No. 544, the new schedule (Income Tax in Scotland):

1. 1.Liability to income tax is based on residence in Scotland as recorded in the electoral register.
2. 2.For the 250,000 taxpayers resident in Scotland whose wages and salaries are dealt with a head office in England (e.g., armed forces, B.B.C. Scotland, the Civil Service and some private companies), taxation should, as far as possible, be transferred to one of the 19 local collection offices in Scotland. Where this is not possible, employers will have to submit special returns for employees resident in Scotland.
3. 3. Liability for Scottish income tax on unearned income can be arranged through separate returns for those resident in Scotland.
4. 4. For wage and salary earners, the allowances would be the same as in the rest of the U.K., the rules of P.A.Y.E. would apply and the tax collected by the Inland Revenue at East Kilbride and the revenue transferred to the Scottish Consolidated Fund.
5. 5. Some 2,000 extra staff would be required to administer these arrangements, as an annual cost by a 1977 estimate of £7 million a year.

Sir David Renton

On a point of order, Sir Myer. Speaking for myself, I was in the Committee when the original point of order was raised. It would be of great benefit to the Committee if the hon. Gentleman could tell us exactly what the manuscript amendment is.

The First Deputy Chairman

It was announced earlier that it would be available to hon. Members. It has been available for some time.

Mr. Mackintosh

I was just about to say that I must thank your predecessor in the Chair, Sir Myer, for his courtesy and helpfulness which has made it possible for small amendments to the original amendment to be tabled. I hope that the right hon. and learned Member for Huntingdonshire (Sir D. Renton) has been able to get a copy of the amendment, because copies are now available.

I must also thank the Minister of State, because it was his willingness to respond to a debate of this kind that has made it possible to have such a debate for it to be in order under the framework set out on the amended paper now before hon. Members. In a moment I shall go through the amendment in detail in order to explain the specific points that are being proposed.

I hope that this will be a Committee stage debate which will look at some of these detailed points. At the same time, I think that my hon. Friend the Member for West Lothian (Mr. Dalyell) is right in saying that some of these detailed points actually raise matters of principle which must be referred to, even if it means a sort of Second Reading debate similar to that which took place on the last amendment.

The major point of the amendment is something to which every hon. Member referred in the last debate. Almost the entire speech of the right hon. Member for Cambridgeshire (Mr. Pym) was an argument in favour of my amendment. The point made again and again by speakers from all sides of the Committee was that it is fundamentally anomalous to have an institution with large powers of expenditure but with no responsibility for raising the money. I know of no other country where there is a legislative and executive body with powers of this kind which does not have the authority to raise money. In effect, we are setting up a body with fewer tax-raising powers than the old local authorities down to borough level.

That is a fundamental anomaly. Although I do not wish to join in the kind of attacks made against devolution in principle, I believe that there is a great deal in what has been said in the speeches in the earlier debate. There is something basically odd about the House of Commons providing large amounts of money to another Assembly which then debates and decides how it will spend those moneys.

The weakness in the amendment of the hon. Member for Aberdeen, South (Mr. Sproat), as he is well aware, was that if there is proper accountability to the House of Commons, the element of discretion in the Assembly will disappear because this House will hold the purse strings and the power of the devolved Assembly to do anything will disappear.

I take the point of the Minister of State that certain functions like education, health and housing have been separate in their form and content in Scotland over the years. They are separately administered by a separate Government Department, and the point of devolution is that these Departments require democratic control. That is the whole basis of the Bill; it is the ABC of devolution, as the Minister said. There are other functions which are United Kingdom functions.

The problem is whether it is beyond the wit of those devising this legislation to produce a system whereby tax revenue comes under the same ABC basis, so that at least the Scottish Assembly has the responsibility of raising the money to pay for the things with which it is entrusted by the devolution Act. The important thing that we have to produce in particular is a sense of responsibility.

I entirely accept the point that it is fundamentally dangerous to have an Assembly which could say "We would like to do XYZ" but other people would have the power to deny it the money with which to do so. One has to be in a position to say "If you wanted to do it, you had the wherewithal to pay for it. You could have raised taxes to do it." Local authorities are in this situation. Although they are partly financed by a block grant, they also have to raise some money from the rates. That produces a responsibility to the electorate which is of vital importance.

6.30 p.m.

This point was well appreciated by all those who dealt with this matter, and not least by the Government. I do not charge the Government with not appreciating the importance of this difficulty. The Secretary of State for Scotland was quite frank on the point when he met an international meeting of economists who dealt specifically with public finance in Edinburgh. The Secretary of State said: I frankly admit that the Government are not satisfied with the block grant system we have arrived at. However, he confessed that he found it impossible to find another system that was satisfactory, but he invited members of the conference to come forward with alternative schemes.

My hon. Friend the Minister of State has said on many occasions that he is open to persuasion and would like to hear of viable schemes that would give the Assembly direct responsibility to raise its own money. We were invited to put schemes forward. That is why I am glad that the rules of order have been altered—[HON. MEMBERS: "Oh."]—or perhaps I should say the amendment has been altered slightly to meet the rules of order to get round this point. I am grateful to the Minister of State and to Mr. Murton for giving the Committee this opportunity.

Mr. Neil Kinnock (Bedwellty)

Let me make a wager with my hon. Friend. However zealous and thorough are the researches of right hon. and hon. Members in searching for a viable means of raising finance, I believe that by some accident they will not find such means this side of the devolution referendum in Scotland.

Mr. Mackintosh

If Parliament feels that it is important to include tax-raising powers, they will be included. I hope that hon. Members will not vote against tax-raising powers and then run out of the House shouting "It is a disgrace that such powers are not contained in the Bill." Many hon. Members voted for the Second Reading, even though they detest the Bill, because they wished the public to have the chance to vote on the matter in a referendum. I hope that if hon. Members feel that tax-raising powers are essential they will vote them in and let the public choose a viable rather than a half-baked scheme.

Mr. Robin F. Cook (Edinburgh, Central)

I do not think my hon. Friend is seeking to suggest that his amendment would give the Scottish Assembly the right to increase taxation. Having studied the amendment, I do not see how one could construe a vote on it as giving power to a Scottish Assembly to increase taxation, because that is not in the amendment.

Mr. Mackintosh

My hon. Friend was not present during the earlier exchanges on this matter. The original amendment offered the opportunity to reduce or increase taxation. Unfortunately, because of the rules of order of the House, one has to have a Ways and Means Resolution to allow the House to debate any increases in taxation. Therefore, that was not in order. My guess is that if the Committee indicates its feeling on this matter in this debate and votes for the amendment, the point will not be lost on the Government and an appropriate further amendment could be introduced at a later stage, on Report or Third Reading. That is a clear course that is available to us. If the Committee wishes to indicate that tax-raising powers are desirable, this is the amendment for which it should vote. If it does not do so, the message will be clear. Let us not take the course suggested by my hon. Friend the Member for Bedwellty (Mr. Kinnock). This is a matter that is within our power, and if he and others are prepared to vote for it it could be carried.

I wish now to deal with the specific points raised in the amendment. I accept that failure to have the power to tax leads to irresponsibility and that it could lead to conflict. Therefore, many of the points made in the previous debate were valid. The problem now arises whether it is feasible to produce tax-raising powers. When this proposition first arose, I was baffled by the statement that to do so would produce insuperable difficulties, because almost every country, including ours, has such powers in respect of local government. The idea that though every federal system, local government system, or, indeed, any system of subordinate authorities can have separate taxes but that they cannot be devised for the Scottish Assembly staggers the imagination and is baffling beyond belief.

Mr. Robert Adley (Christchurch and Lymington)

Will the hon. Gentleman accept that his argument has been pursued by the British Treasury from time immemorial—namely, that there must never be any form of fiscal devolution? Is he not proposing a valuable reform with a wide range of alternative uses in other spheres?

Mr. Mackintosh

I should like to comment on the hon. Gentleman's useful intervention. The Treasury takes this view only when dealing with its own affairs. This country has devised a system of federal finance in Canada, Australia and, in later days, in one colony after another. It is only when the Treasury looks at its own parish that it takes the view that it would be a complete disaster if we allowed any relaxation or ceased to enjoy the fine tuning of which we have such happy recollections in the last 15 years.

The key point of substance in the Treasury memoranda to the Layfield Committee, the Kilbrandon Commission and everybody else on the subject of taxation is that if we were to give marginal powers to the Scottish Assembly to increase or decrease taxes it would reduce our capacity to operate demand management in the United Kingdom economy. I shall return to that matter a little later.

Mr. Malcolm Rifkind (Edinburgh, Pentlands)

When the hon. Gentleman says that he is surprised that the Government find difficulty in devolving tax-raising powers, he always refers to those countries which have had a federal system over the whole of their territory. Does he appreciate that the Government's difficulty lies in the fact that, if one chooses to devolve power to one part of a unitary State without devolving any powers to the remainder of that State, it is difficult to devolve tax-raising powers without distorting the whole arrangement?

Mr. Mackintosh

I do not accept that argument. If the hon. Gentleman cares to examine the situation, he will find many federal States with different systems of devolution giving different tax-raising powers to different States. For example, the Canadian federation gives different powers in respect of mineral rights to different parts of that country, the United States has a similar arrangement in respect of offshore oils, and other countries give different powers to conurbations to raise revenue. Therefore, the problem is not insoluble. Indeed, 50 years ago we gave different powers to the Northern Ireland Government at Stormont.

There is a further important point. In devolution matters, the correct course is not to give too little but to give adequately. If a devolved body decides not to utilise one of its powers, that is a voluntary act on the part of that devolved body. However it is another thing, if one wants to reduce conflict, to give too little and then the devolved body says "But for the lack of this tax-raising power, we could do this, that or the other."

Mr. Dalyell

My hon. Friend said that these matters were not insoluble. I have basic sympathy with the soundness of making certain tax powers available to the Assembly if we devolve to that body. Therefore, my hon. Friend may get my vote, but before that happens perhaps he will answer one question. Even assuming that these problems are not insoluble, what would be the cost in terms of Inland Revenue staff? Yesterday we debated the work of the Public Accounts Committee, and it was not denied by the Treasury when these matters were raised that this kind of activity would put up Inland Revenue staff from a figure of 83,000 to 100,000. Can my hon. Friend say what would be the cost in Inland Revenue staff?

Mr. Mackintosh

My hon. Friend is too keen to get to that point, and I shall deal with it when I seek to explain the provisions of my amendment. I have asked specific questions of the Treasury on that subject, and I shall be able to give him a specific answer.

I wish now to deal with the scheme proposed in the amendment and to seek to explain it. I do not say that it is by any means the best or an immutable scheme. It shows the kind of possibilities available should one wish to follow this course. I do not think the Government are suggesting that such a system is unworkable.

The system as set out in the amendment is as follows. The first purpose is to find two sources of revenue—not necessarily two, but in this case there are two sources of revenue—from Scottish taxpayers allocated to the Assembly. The first is the proceeds of personal income tax. The second is 50 per cent. of the proceeds of assigned excise duties, which I have listed specifically as tobacco duty, alcohol duty, duties on hydrocarbon oils and duties on betting and gaming.

The point here, in the first case, is that the Assembly could lower—and, if it were in order, I should say raise—the level of personal income tax to be levied in Scotland. The Assembly could have strict limits placed upon the degree to which it could raise or lower taxation, so that it would be a marginal matter which would cover extra expenditure—

The First Deputy Chairman

Order. I think that the hon. Gentleman is now creating some difficulty for the Chair. His original a mendment was quite specific—either to raise or to lower the level of taxation. It became in order only through the courtesy of what was done, and he has already paid tribute to the arrangement which has been made by which he deleted the question of raising the level of revenue. Now that that has been done, I see no point—indeed, I envisage some difficulty for the Chair—in allowing the hon. Gentleman to incorporate what was in the original amendment, which was entirely out of order.

Mr. Mackintosh

I am grateful to you, Sir Myer, for that correction. What I mean is that, wherever I say "lower", the hypothetical possibility of raising could also arise were it in order. I think it for the convenience of the Committee in considering the matter to realise that this is feasible though not proposed, and I therefore hope that no one apart from myself will actually discuss it.

The First Deputy Chairman

Order. If there were any suggestion of a debate in depth on the question of what one should do if the level of taxation were raised, that would be strictly out of order and I should so rule.

Mr. Mackintosh

I am sure that you would, Sir Myer, having had the benefit of sitting under your chairmanship on many occasions.

The First Deputy Chairman

Order. The hon. Gentleman is beginning to imply that I may have been usurping powers not vested in the Chair. I am sure he will readily pay testimony to the fact that the Chair has been absolutely fair in applying the rules relating to the conduct of debate in the House.

Mr. Mackintosh

I was about to pay tribute, Sir Myer, to your capacity to hold the most unruly Members in order and to your capacity to ensure that our debates precisely and perfectly follow the rules of order. Indeed, my view is that your capacity in that respect is a tribute to your early training in a Scottish assembly, in Scottish local government, where you had a similar reputation for dealing severely with people who in any way strayed.

The First Deputy Chairman

Order. I must assure the hon Gentleman, who, I believe, did not have any experience in a local government, that members never attempted to raise matters not covered by amendments which they were proposing.

Mr. Mackintosh

I accept that entirely, Sir Myer.

Mr. Dalyell

Could my hon. Friend explain—

Mr. Mackintosh

No, I am not giving way to my hon. Friend now. After I have finished my explanation, I shall gladly give way to him.

Let me return to the amendment and to the three points made. First, there is the allocation of personal income tax to the Assembly, with the power to reduce personal income tax as I have described it. This would be a relatively straightforward matter which, I am sure, can be readily contemplated by my hon. Friend the Member for West Lothian, who rattles his keys when he feels irritated and also has a certain tendency to attribute others the practice of producing half-baked ideas in these circumstances.

For those who are interested, such a scheme as I propose is set out in the additional memorandum on separate direct taxes for Scotland submitted by the Inland Revenue to the Royal Commission on the Constitution and set out in Volume 10 of the written evidence. The Inland Revenue there pointed out that to hand over personal income tax collected in Scotland from persons resident in Scotland would not be a difficult proposition. I shall not bore the Committee with the details, but in one passage the Inland Revenue said: We already have in Scotland the nucleus of a separate tax administration. In that country there are 19 local collection offices which collect income tax deducted by Scottish companies". The memorandum goes into that in detail and point out that the total sums collected in Scotland are paid into a bank account in the Edinburgh head office of one of the Scottish banks.

6.45 p.m.

Thus, a personal income tax allocation to Scotland is not only feasible but would be far cheaper than Layfield considered, since Layfield was looking at a separate income tax for specific local authorities whereas this would be for a large region or country such as Scotland.

On the question of the collection of excise duties, again there are local offices involved and there would be no difficulty in half or any other agreeed proportion going to the Scottish Assembly.

I come now to the specific point raised by my hon. Friend the Member for West Lothian. Having thought of this scheme, I asked the Chancellor of the Exchequer what would be the cost of such a scheme in terms of staff and expenses of administration, and his answer—given to me on 14th February 1977—was that there would be 2,000 additional staff required and the total cost would be £7 million.

That is a considerable sum of money, and one has to weigh such a cost in terms of staff and money against the value of responsibility and accountability by the Scottish Assembly to its own electorate for its expenditure. The only comment I make on this matter—I dislike any question of extra bureaucracy or extra cost as much as my hon. Friend the Member for West Lothian does—is to remind my hon. Friend that he happily charged through the Lobby to vote for £130 million for the job creation scheme, and this would be a mere £7 million for 2,000 jobs to be created—higher paid, skilled jobs in Scotland, and rather more permanent, I think, than employment created by job creation schemes of the other kind. I wish that my hon. Friend would stop rattling his keys.

Mr. Russell Johnston

I fear that the hon. Gentleman is making a false assumption in saying, as he did so quickly, that these would be 2,000 jobs in Scotland. If he makes further examination, he will find that the bulk of the jobs would be created in England.

Mr. Mackintosh

I am grateful for that correction. The hon. Gentleman is quite right. The jobs in the scheme set out by the Inland Revenue were in order to separate the tax of those residents in Scotland taxed by British companies whose headquarters were outwith Scotland. That is a valid point.

Mr. Fairbairn

Before he leaves that point, could the hon. Gentleman explain the effect of the words in his proposed new schedule: Liability to income tax is based on residence in Scotland as recorded in the electoral register"? There are many persons—such as himself, no doubt—who have electoral registration in two countries and whose income may be derived from both countries. How would those matters be resolved?

Mr. Mackintosh

Those are the matters which would take the 2,000 civil servants and cost the £7 million—the separation of the people there referred to, for example, members of the Armed Forces, BBC staff, Members of Parliament and staff of certain international companies whose headquarters and taxation are in England but whose place of rsidence is in Scotland. The Inland Revenue considered this. As I say, anyone interested will find the matter set out in some detail in its evidence. It believes that it would not be beyond most companies to separate out those resident in Scotland, but there would be some administrative cost on the Inland Revenue, and that cost I have described.

Mr. Dalyell

rose—

Mr. Mackintosh

May I finish my explanation of the three paragraphs of my amendment? I shall then be happy to give way, as I have been on several occasions, since there is no attempt at concealment here. I am attempting to produce a genuine and workable scheme. I am quite open to argument that better schemes could be produced by others, but what I will not accept is the argument that it is not possible to devise a scheme whereby revenue could be allocated to the Assembly to meet its particular functions and that the power to decrease—or increase—the revenue from these sources would be a valuable and important part of the devolution exercise.

During the debate on the reports of the Public Accounts Committee yesterday, when I was not present, my hon. Friend the Member for West Lothian attacked me on this subject. I have not the slightest objection to his attacking me. He said that what I had then proposed was a clause mind-boggling in its complexity. I have known my hon. Friend long enough and well enough to know that his mind has failed to boggle at far more complex things than this.

The proposition that is being made here is a very simple one, and I shall explain it. The reason for this third paragraph is that it is not clear that the total proceeds of the taxes listed under paragraphs (a) and (b) would be roughly or exactly equivalent over a period of time to the Scottish needs—that is equivalent to the proportion of public expenditure enjoyed by Scotland at present. Therefore, to see that an equalisation grant is feasible if the Scottish revenue falls far too short or if the Scottish revenue is too great that an additional payment is made back to the British Exchequer—[Interruption]. It is important to allow for both. It is not impossible that industry might get going in Scotland with the stimulus of oil so that revenue in Scotland would increase to an amount greater than its present share of the United Kingdom revenue. In such a case, it is important that the money goes back to the Exchequer, as well as that an equalisation grant comes out of the Exchequer if there is a shortfall.

In these circumstances, there has to be something like a Goschen formula. The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) said that it was one eleventh. It was not. It was eleven-eightieths and, oddly enough, the eleven-eightieths is almost exactly what Scottish public expenditure is in ratio to United Kingdom expenditure today.

If the Scottish revenues allocated to the Assembly came to considerably less, there would have to be an equalisation element—it would be a small block grant element—which would come in in that way. If they were more, the position would be the same as was allowed for in the old Northern Irish constitution where an Imperial contribution was made out of any surplus. It did not exist, but, had it existed, it would have been paid into the United Kingdom revenue. In these circumstances this is allowed for, with one important proviso, which is that, if the Scottish Assembly decided to reduce income tax, it ought not then to be able to claim more from the United Kingdom Treasury in consequence.

Therefore, for the purpose of calculating the ratio of tax yield in Scotland to tax yield in the United Kingdom, it would have to be calculated at the standard United Kingdom rate. Thus, if the Scottish Assembly took advantage of greater efficiency, of doing without a tier of local government or of cancelling ad hoc bodies, and thereby was able to reduce public expenditure and taxation it would be important to ensure that it did not claim a greater amount from the United Kingdom Treasury as a result.

That is the sole purpose of his amendment, and it is not far different from the equalisation clauses put, for example, in the West German constitution, which follows a similar system betwen the poorer and richer Länder in West Germany.

Mr. Leon Brittan (Cleveland and Whitby)

Does the hon. Gentleman agree that the existence of para (c) and the explanation of its purpose given by him show that essentially his scheme is a needs-based scheme in which, at the end of the day, Scotland will get the money which on someone's assessment the needs of Scotland entitle it to get, plus a discretionary element to vary the rates downwards in the case of the amendment permitted by the Chair? If that is so, will not the hon. Gentleman also agree that para (b)—the assignment of a fixed percentage of certain taxes over which the Scottish Assembly has no say—is a piece of complete window-dressing which has nothing to do with giving more power to the Scottish Assembly and is a pointless exercise in relation to both needs and powers?

Mr. Mackintosh

I do not agree with either of those points. If it says in the Bill that a certain proportion of moneys and certain taxes are allocated automatically to the Assembly, there is the world of difference between that and having an annual negotiation to get the entire sum of money granted by this House, when all the arguments in the last debate would be made—that, if moneys were granted by this House, the Assembly must be accountable to this House. This happened in the case of Northern Ireland, where, because the United Kingdom Treasury made special grants to Northern Ireland, Treasury control became effective in Northern Ireland.

The point about paragraph (c) and the equalisation account is that it is a far smaller amount and it will arise only under certain contingencies. I should like to see the percentage of the taxes allocated under (b) to the Assembly altered so that normally they provided enough to cover the total revenue of the Assembly.

I do not know whether the right hon. Member for Cleveland and Whitby (Mr. Brittan) has ever been a kept man. I was a kept man for a short period when I was a student. I was kept by my father. He provided me with an automatic amount which came out of his bank account and into my own. There was the world of difference between having to go to him every month to ask for it and having it paid in automatically.

Mr. Brittan

This is important. The hon. Gentleman envisages a situation not only in which if, accidentally, the assigned revenues are not sufficient there has to be a payment of equalisation under (c), but the reverse. If the assigned revenue is too much, Scotland will have to give back some money. Is the consequence that it is only in the statistically coincidental and unlikely circumstances of the amount produced by the assigned taxes happening to equal what on a needs basis Scotland is entitled to that there is no such payment one way or the other?

Does it not follow from that, in almost every situation other than the statistically freakish one, that a calculation will have to be made by an equalisation payment in one direction or the other and that, once that happens, the only way in which such a calculation can be made is on a total assessment made by the British Treasury in negotiation with the Scottish Government of the total needs of Scotland? To pretend otherwise is to do the worst of all things legislatively, which is to give people the illusion of independence and the illusion of automatic payments which they will not get in reality.

Mr. Mackintosh

The hon. Member for Cleveland and Whitby is trying to be too clever. However, he has not read the amendment properly. It does not require it to be exactly the same. It requires it to be 10 per cent. either way, and this is a considerable margin. If the amounts allocated under the first two paragraphs are reasonably accurate, they should fall within this margin in most years. It is only the very unlikely contingency which led my hon. Friend the Member Bedwellty to scoff—the possibility of money being handed back—which concerns the hon. Gentleman, and this could be met by changing the percentage under (b). This is what I hope would happen over a period of time.

The hon. Member for Cleveland and Whitby is also being too precise. He thinks that, because it is not possible to guarantee every penny, it is better to go to a block grant for the entire sum. This is quite wrong. If it had to negotiate about a marginal extra, in the last resort the Assembly could say "If these are the penalties and if these are the costs being imposed on us, we prefer to have a political row but not to take it." This is open to the Assembly if it is a 10 per cent. or 5 per cent. margin. It is not open to it if it is an annual renegotiation of the entire sum on which the Assembly is dependent.

There is a vast difference between a marginal situation of that kind and total dependency, which I tried to explain in the personal analogy that I made. There is a difference between total dependence and a marginal dependence which may arise from time to time.

I give an example from another part of the world. This again happens in West Germany, where the richer Länder have to pay sometimes and the poorer Länder have to get a subvention when this sort of situation arises. The fact that these Governments have a large block of assigned taxes which gives them an assured basic position on which to rest means that they have an independence vis-à-vis the central Government and a responsibility to their electorates which would not otherwise arise. There is, therefore, this great difference of principle which is of enormous importance.

Mr. Jim Craigen (Glasgow, Maryhill)

Has my hon. Friend quantified the size of the equalisation grant which would be necessary at present from the Treasury to the Scottish Assembly in order to top up the income which it would receive from (a) and (b)?

Mr. Mackintosh

I have. The (a) and (b) sums of money get as close to the original White Paper figures as possible. I have not been able to get up-to-date figures of the present revenue, but this can be adjusted without difficulty. Whether the percentage is 50 or 60 under (b), the figures could be adjusted if the situation changed. At the time of the White Paper, the two sums were about equivalent to the block grant.

7.0 p.m.

Mr. John Smith

Perhaps I can assist my hon. Friend. I have had calculations made. I have had some difficulty with paragraph (b) because I understand that it is not easy to impute the basis on which it may be calculated. The answer is a yield of £1,275 million under paragraph (a) and under (b) a yield of £260 million. So, to reach a figure of £1.871 million, there would be a shortfall of, say, £333 million.

Mr. Mackintosh

I am grateful to my hon. Friend. If it were £300 million out, I think the gap would be too great and it would be better to have the percentage altered to make the sums produced as close as possible at the time of enactment. If the situation changed, the percentage might be negotiated from time to time. It is no good the hon. Member for Cleveland and Whitby saying that if the allocated taxes at a rate of, say, 80 per cent. or 90 per cent. met only part of the Assembly's expenditure, and that if it wanted more than it got from that source plus an equalisation grant, and the Assembly then has to raise the extra by extra taxation, this responsibility is something to be despised. It is far better than the situation where a spending body has total dependence upon a single source of revenue which it is not responsible for raising.

Mr. Brittan

The hon. Gentleman has been kind enough to refer to me again. I was not referring to the situation with contempt. I simply do not think that his proposal would do the trick. Does he not agree that if one not only has to have an equalisation payment—not for every year, but often—but in addition may from time to time have to renegotiate the percentage of the proceeds of the assigned taxes, one is really having to have political negotiations, which the hon. Gentleman does not want? The only difference is that to renegotiate the percentage of the assigned taxes would be worse than renegotiating the equalisation payment or the block grant, because the renegotiation of the percentage would involve an amendment to the statute whereas the other course could be achieved by administrative means.

Mr. Mackintosh

The thing that surprises me about the hon. Gentleman is that he is clearly suffering from the syndrome of people living in a centralised State. We renegotiate our contributions to and our receipts from the EEC. That is a political matter. What would it be like if the entire revenue of this Parliament was dependent on the decision of the EEC? Can the hon. Gentleman imagine the situation and what this House's responsibility would be if all its money had to be raised through a different Assembly over which it had no responsibility? Only those whose minds are completely bogged down by centralised government can imagine that there is an identity between this occasional renegotiation of the overall level for equalisation purposes and the situation in which the entire sum has to be negotiated.

Mr. Gerry Fowler

Can my hon. Friend clarify one point? I have been studying carefully the wording of the amendment. The last sentence reads: If the sums raised by personal income tax (again calculated at the standard U.K. rate) and the half share of the assigned excise taxes are together greater than the Scottish proportion of public expenditure by ten per cent. or more of that sum, the surplus will be paid from the Scottish Consolidated Fund into the Treasury.'. I assume that the word "surplus" there means an excess over 100 per cent. and not 110 per cent. If that is so, does my hon. Friend say that it is proper for the Assembly to have 109.9 per cent. for what it requires but that if the figure is 110.1 per cent. it should get only 100 per cent.?

Mr. Mackintosh

I am grateful to my hon. Friend. That is what I am saying. It meets the point that one has to have leeway. One cannot have an adjustment for every percentage point up or down, but can have it only when a significant gap occurs, which I have pitched at 10 per cent.

Mr. Kinnock

My hon. Friend related a domestic analogy. Let me expand it further. If he were capable of living entirely within the means that his father was kind enough to allocate to him, there would be no problem. But let us presume that he occasionally exceeded the amount available to him and had to go to his bank manager and ask for a small amount. Would it not be the case that, at the time he had to go to the bank manager in order to cover the margin of finance needed, that margin of finance would loom at least as large as the allocation by his benign father at a different period? Would there not, therefore, be a domestic-political relationship, but nevertheless a realistic one, with his bank manager, quite different from the relationship that he enjoyed with his father?

If my hon. Friend is prepared to use such an analogy to describe and defend his proposition, will he extend it and put it into the situation where Scotland, in virtually perpetual deficit with the central Exchequer, will be much more subject to the whim and prejudice of this Parliament, to the disadvantage of the Scottish people, than it would be if, on an entirely United Kingdom needs basis, the same grants were allocated as they are to every other part of the United Kingdom?

Mr. Mackintosh

I will deal with the general aspect of the intervention but not with the personal relations. Perhaps I should now use a local government analogy instead. If my hon. Friend's argument were correct, it would have made sense to finance all local government throughout Great Britain by block grant and it would never have made sense to say that local government must raise some money of its own, and therefore have some responsibility in situations in which it could turn to the central Government and say "We are going to raise some money other than the rate support grant." But we have always taken the view that local authorities' responsibility to their electorates depends, despite the presence of the block grant, which is an equalisation grant, on their power to raise at least some of their own revenue.

We have always said that the greater the block grant, the more dependence there is on the central Government. The less the block grant, the more a local authority has genuine independence to carry out affairs allocated to it and in its responsibility to its electors. This is the position we have taken time and again, and it has been taken time and again in other countries as well. I cannot see why hon. Members seem to imagine that the reverse attitude should now be taken and that total dependence on a block grant, negotiated every year, is preferable.

My hon. Friend the Member for Bedwellty suggested that it would be better for the House of Commons to give a block grant every year to the Assembly on a needs basis, calculating the needs of the people of Scotland, item by item, in deciding what they should get. But that would be the antithesis of devolution. It would destroy it completely. If my hon. Friend wishes to destroy devolution—as I know he does—that is a valid proposition, but he must accept that those of us who want the Assembly to work and to be a satisfactory system of government see the situation differently.

The crucial thing is that the Assembly should determine the needs of the Scottish people within those functions devolved to it—education, health and housing. If the House of Commons were to determine those needs, what would be left for the Assembly to do? The legislative powers would become a sham. Nothing would be more calculated to produce the kind of conflict that my hon. Friend the Member for West Lothian and the hon. Member for Reigate (Mr. Gardiner) have so often commented upon. A degree of financial independence is essential if the Assembly is to be a responsible body and fulfil its tasks and if it is not to be constantly at loggerheads with Westminster.

Mr. Dalyell

My hon. Friend is in full flood and is being most eloquent. I want to ask a pertinent question now. He says that 2,000 extra staff would be needed for incidental trappings of the Parliament. If the figure is 2,000, I doubt whether the Inland Revenue Staff Federation would be happy if only £7 million were allocated for payment. But where are they to come from? Every one of us in the House gets countless letters complaining about delays at East Kilbride and other tax offices. What our constituents worry about is getting their tax affairs sorted out. If we had to find 2,000 skilled people who are already in short supply, I think that our constituents would go round the twist.

Mr. Mackintosh

I think that my hon. Friend is round the twist himself in this case. We are talking not of 2,000 of the existing staff but of 2,000 extra staff. All the people delaying my hon. Friend's constituents' tax affairs would still be doing it. It would not affect the speed or otherwise of the answers to the letters to East Kilbride which we all send.

The point is that there would be a need for 2,000 extra staff. The estimate for the staff and for the cost came from the Inland Revenue. The hon. Member spoke of this as merely providing the "trappings". In fact, the financial basis for devolution is of the essence. Anyone who has been in local government knows that he who holds the money holds the power. This is the key to the whole thing. To suggest that we in this Parliament are to carry out this massive constitutional change but that we cannot manage to find, out of the ranks of the graduate unemployed, 2,000 extra people to run this small operation is ludicrous. It reminds me of when I was on the Select Committee on Procedure. We would produce schemes for the reform of the House of Commons and were told that they would break down because they needed half a doorman extra and we could not get that.

Mr. Adley

Is not the hon. Member for West Lothian (Mr. Dalyell) making a serious error in assuming that the Scottish Assembly, in the way in which it would raise money, would have to go on using the outworn and outdated methods employed by the British Treasury? Can he confirm from his own experience that in the United States the number of tax officials required to raise the tax revenue there is approximately equal to the number required in the United Kingdom? Is the hon. Member in envisaging his scheme committing the unpardonable sin—as far as the Treasury is concerned—of considering a new and more modern form of raising tax revenue?

Mr. Mackintosh

That is an interesting proposition which I would be glad to follow. The idea that we cannot do a better job on this issue is ridiculous. The serious proposition that my hon. Friend the Member for West Lothian was raising—that this type of scheme should stand or fall upon the availability of a number of Treasury or Inland Revenue officials—is ridiculous. I give my hon. Friend the credit in that this question of finance is one of the broader issues he referred to. One wants the Assembly to have adequate financial responsibility to the people who elect it or one domes not. If one does, the task of producing the people to do the necessary administration is not an insuperable objection. That kind of objection can be put aside.

Mr. Small

rose—

Mr. Teddy Taylor

rose—

Mr. Mackintosh

I am giving way to the urban guerrilla, the hon. Member for Glasgow, Cathcart (Mr. Taylor).

Mr. Teddy Taylor

Assuming that we solve the problem of the 2,000 staff and that they are available, can the hon. Gentleman say how he would solve the problem which would arise as a result of these people not being required all the time? I think he said that they would be required only on the occasions when Scotland decided to have a separate level of income tax. What do we do with the staff if we have a separate level of income tax in only one year out of five?

Mr. Mackintosh

The hon. Gentleman misunderstands the situation. I do not blame him, because few of us have read the submission of the Inland Revenue on this. These people would be required all of the time because their functions would be separating out all those people who are resident in Scotland but whose tax is paid for them by United Kingdom companies. The question of the level is no problem because it is simply fed into the computer—whether it should go up or down 3p or 4p in the pound.

Mr. Small

Will my hon. Friend indicate whether this proposal would weaken or strengthen the historic dimension of the Goschen formula by reliance on a mathematical base, dependent on "down time" in the accountants' assumed assessment calculations?

Mr. Mackintosh

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.

Mr. J. Enoch Powell (Down, South)

The seminar which the hon. Member for Berwick and East Lothian (Mr. Mackintosh) has conducted during the past three quarters of an hour has formed a fascinating introduction to the second section of what I think is today's tripartite debate—for the next Question, I assume, will be "That the clause stand part of the Bill"—upon the question of devolution to Scotland viewed this time from a financial aspect.

I think that the hon. Gentleman's attempt to provide a revenue and to solve the conundrum has, like previous attempts at earlier stages of the Bill, proved the nature of the conundrum itself in yet a different way. The clause begins by setting up a Scottish Consolidated Fund and a Scottish Loans Fund. Upon the face of it this means that we are providing for Scotland institutions which correspond to those which we have in the United Kingdom. We have our Consolidated Fund: Scotland is to have a Scottish Consolidated Fund. We have our Loans Fund: Scotland is to have a Scottish Loans Fund.

But, of course, that is simply a facade. It is an empty husk of the reality we possess that is being offered by the Bill to the Assembly and Executive—they will be called a Parliament and a Government—with which we are purporting to endow Scotland on the grounds, according to the Prime Minister in one of the earliest speeches made upon these proposals, than Scotland is a nation.

Many times already today and previously the old adage "No taxation without representation" has been cited. The reverse of that adage is equally significant: "No representation without taxation." It is that proposition which the Committee is exploring today.

We find we are setting up a body similar to ourselves in deriving its authority directly from the electorate. It is a body which we shall endow with the power to make law as well as with the power to control an Executive. But we are proposing in the Bill to say to that creature in our own image "One thing you shall not do. You shall not levy taxation." What a strange, ironical thing for the House of Commons, of all bodies in the world, to be doing! What a strange thing for the House of Commons, which grew, which developed, which acquired its sovereignty because its original function was to grant taxation, to say to this creature in its own image "By the way, there is just one power that you will not have. That is the power which is essential to us, by which we were created, the power to tax"!

So what sort of a Scottish Parliament will this be? Below it, as it were, will be the local authorities, the local authorities which we are assured the Bill will in no way prejudice in their powers or in esteem. The local authorities levy a rate directly or indirectly. They are responsible to those who elect them for the consequences of their administration and of their decisions, so far as those consequences are expressed by the rate which they find themselves obliged to levy. So looking downwards, the Scottish Parliament will see these inferior bodies, which have the attributes of taxation and representation and which the electorate recognises as having those attributes, in that within their functions they possess a revenue exclusively assigned to the purposes of local government—rateable value and the power to levy a rate on it.

Then, turning its eyes upwards, the Scottish Parliament will perceive the donors of the sums which are to be in the Scottish Consolidated Fund and the Scottish Loans Fund. It will perceive the House of Commons, the source of its moneys, a House of Commons which levies taxation and is responsible to those upon whom it levies it for the consequences of what it does.

Betwixt and between there will be an Assembly whose sole financial discretion will consist in allocating slightly differently than might otherwise be done certain total sums decided upon by this House under the advice of Her Majesty's Government in the United Kingdom.

Such a structure as that could not possibly endure. Such a situation could not for a moment be found to be toler- able. It is one thing for us here to be told and to understand that if we insist upon more expenditure in one direction we shall be faced with the choice of retrenchment elsewhere or of higher taxation. But that will not be the situation of the Scottish Parliament. It will be allocating a fixed sum. It will be making its variations, shifts and substitutions within a total which others have decided.

It is no good saying that therefore that body will have a financial responsibility which corresponds adequately to its representational character as directly elected by the Scottish electorate. On the contrary, from first to last it will say to those who elected it "Many are the things that we would do, many are the possibilities that we would like our legislative power to be used to explore and to exploit, but, alas, we are powerless. You have elected us: we are the representatives of the Scottish nation. But we are merely allowed, within a total which others have fixed, to shift a little this way, a little that way. If there is a different ethos of the Scottish people, we have no means of expressing it."

In winding up the last debate, the Minister of State said that devolution must be legislative as well as administrative. Well, certainly, in appearance we are devolving legislative power to this new Scottish Assembly. But it is only an appearance. This power to legislate is not primarily being given to it, any more than it is utilised by us, in order for it to decide, for example, whether homosexuality shall or shall not be criminal. It is not for matters of law which do not affect the economy, which do not affect taxation, which do not affect the services, it is not for those purposes that this is to be made a legislative Assembly.

If we examined the content of a Session's work of this House, what percentage would we find was non-expenditure-generating or non-revenue-producing? It would be very small—[Interruptionl]—5 per cent., somebody has said. I think that that is a reasonable estimate. When we talk about legislating we are talking about legislating as an instrument of modem government for giving a form to a society, giving it a structure of services, and modifying and extending that structure of services.

So the power to legislate in modern terms, the power to legislate for the reasons for which devolution according to the Minister of State ought to be legislative, is used in order to generate expenditure and consequently to demand revenue. Legislation in modern terms divorced from expenditure and taxation is meaningless. More simply still—legislation divorced from the power to tax is meaningless.

So we are giving a stone instead of bread to a Scottish Assembly if we say "You have power to legislate, but if your legislation involves expenditure on a scale not envisaged, or on a scale that you cannot fit within the total which another body has fixed, you can forget it. Your legislation will be merely an exercise in frustration."

As in so much of the Bill, we are creating by what we are doing the essentials, the inevitabilities, of frustration. We are refusing to recognise—again it is the old proposition, the old axiom—that within a unitary State one cannot set up a devolved legislature and administration dependent upon that legislature. The hon. Member for Berwick and East Lothian, in his valiant attempt to furnish revenues over which the Assembly could be given control, only succeeded, in his own way and from another direction, in proving that proposition. As his seminar proceeded, and question and answer followed each other, all he came up with in the end was a slightly modified block grant. In the end there were to be sums, fixed to meet needs, which ultimately the Government and this House would determine. When the hon. Member set out to provide a tax revenue, to give to the Assembly the powers of taxation without which it is meaningless and the elective process is an insult, he discovered that he had not done it and that he could not do it.

What is the difficulty? The difficulty is that we are trying to set up a partially devolved Government in a part of the United Kingdom. Because it is partial devolution in a part of the kingdom, immediately we get into the jungle, in which the hon. Member for Berwick and East Lothian valiantly but vainly fought, of allocating and carving up a predetermined slab of the revenue that this House decides to raise from the total income of the United Kingdom.

7.30 p.m.

Mr. Mackintosh

If devolution was complete, covered the whole of the United Kingdom and there was a complete federal system, there would have to be equalisation payments from central Government taken from the richer regions and given to the poorer regions. But that would in no way subordinate the regions to central Government. That has not been the case in other countries where the federal system applies. There is also an equalisation area within the EEC. More money is given to certain parts from the Regional Fund. This does not destroy our independence as a Parliament to run our own affairs.

Mr. Powell

We shall see about that. However, in a federation, even though the federal authority operates some form of equalisation and grants are made from the centre, the States or secondary components are in a position comparable with local government authorities in this country which, throughout the country, command separate revenue from an exclusively allocated tax base on which they all draw. The hon. Member was devising for part of the United Kingdom a fraction of taxation that would otherwise be levied generally in the United Kingdom for the purposes of the whole.

Following that line of thought we are taken in one of two directions. Mention has been made of the Government of Ireland Act 1920. In the White Paper on the financing of devolution the story of the two parts of the former island of Ireland is several times mentioned. It is instructive.

If we have an Assembly to which powers of taxation are given—and it is impossible logically to deny these powers to an Assembly so created, and for such reasons, as we are creating the Assembly in Scotland—it must either move to the complete logic of independence, with all requirements being met from the whole of its national income, or else the opposite must happen, which is what happened in Northern Ireland—the exception that proves the rule—where because the majority were so determined that nothing should separate them from the rest of the United Kingdom the legislative and financial powers were deliberately allowed or forced to atrophy. The people of Ulster accepted, and indeed demanded, the atrophy of these powers because the full and natural use of them would have forced ever-increasing division from the rest of the United Kingdom.

So on the basis of considering revenue and finance, we discover once more that what we are doing is destroying the foundations of the United Kingdom. If this Bill is to be a reality, and not just a mockery, what we are attempting is something tantamount to setting our hands to the dissolution and dismemberment of this unitary State itself.

Mr. Kinnock

I apologise for my crouch, but I have a pain in the neck which arises not from Scottish devolution but from more fundamental physical causes. I hope that the Committee will bear with me even if I keel over in the middle of my speech.

The temptation in this debate is for those hon. Members who are against devolution proposals, as I am, to say to the Scottish Assembly "Let it have self-financing powers, no matter how tortuous or incompetent. Provided the demand is there for some sort of self-financing powers and the necessity exists for giving this responsibility, it does not matter how distorted, incompetent or clumsy the arrangements are". The temptation is to say "Let it have the power", in the sure knowledge that the granting of such power and the fragmentation of the unitary system that this will bring about will be of value in the short-term to the people of Wales.

One is tempted to say "Let the Scots have their heads; let us continue this devolution exercise; let us consider this monstrous constitutional step as no more than an experiment in advancing democracy". In that frame of mind we could treat the people of Scotland as guinea pigs who must learn by their own mistakes, and who can return to a sane system of financing their needs when it is all over.

Of course, we cannot really give in to such a temptation, firstly, because of the interests for which we have responsibility for the whole of the United Kingdom, and, secondly, and more parochially, because of the way in which devolution has tumbled, staggered, crept and crawled forward, with Wales being dragged along on tartan coat-tails. My great fear is that in the event of the Government conceding or advancing the idea of revenue-raising powers for the Scottish Assembly the awful day may come, if there is ever a Welsh Assembly, when similar proposals will be made for it.

Once upon a time the nationalists in Wales advocated an advanced degree of independence for Wales. Now we discover that there is more contention between them, and they are beginning to understand that the situation in Wales for the foreseeable future is one of perpetual public expenditure deficits for the English taxpayers. That is my second reason for wishing to block any proposition now for granting revenue-raising powers to the Scottish Assembly.

Let us consider the attitude of the Government to these propositions. We have read in successive White Papers of the way in which the Government ran their fingers through their hair and tried to think up viable—to use their word—systems of permitting self-financing of the Assembly but have been unable to come up with anything. The Government will, in any case, fail to come up with such a proposition. There is even a sentence in the most recent White Paper that throws responsibility back on to the Assembly for trying to dream up a scheme for self-financing.

The Government do this in the knowledge that the Assembly will never be able to formulate procedures to satisfy the moving criteria that the Government would lay down for a satisfactory self-financing scheme. The Government know, as does everyone else, whether for or against these proposals or in favour of much more extensive proposals, that the moment powers to raise taxation are offered and taken by one of the devolved Assemblies, the fracture of the United Kingdom will have begun—not through the spontaneous activity of that part of the kingdom where there has been devolution, but because of the reaction which that act must provoke among people whose contributions in the form of taxation will continue to subsidise the livelihood and standard of living of the people in the devolved area.

Even if there are sources of revenue available to the Scottish people for a limited period, they will be exhausted in one-third of the lifetime of the average male citizen of the United Kingdom, and that is not a sufficient basis on which to build a perpetual and irremovable constitutional change.

Mr. Buchan

My hon. Friend has to prove, not that there will be potential for pressures and splits, but that an amendment which introduces tax-raising powers will exacerbate them. The position that my hon. Friend postulates is that there will be infinitely more splits and divisions with the decline in Scottish income over the years, but will not the dole from the Assembly in the form of a block grant lead to sharper objections in the rest of the United Kingdom than a situation in which a proportion of that money would have to be levied by the Scots?

Mr. Kinnock

I take my hon. Friend's point about his dislike of people raising the prospect of splits and divisions. We have a Bill advocated by the Leader of the House and many others which, at least in their understanding, provides us with the means of preventing splits and divisions which are as much in their imagination as my hon. Friend thinks that they are in mine. Which is the most fractious—the block grant, or a self-financing power, topped up, as would invariably be the case, by a smaller block grant made available through Parliament? I do not think that my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) will imagine that there will be a situation, especially if the degree of unitary State that the Government advocate is maintained, in which the Scottish people will have access to major new sources of revenue to finance their needs.

They will be in a permanent state of public expenditure deficit. I hope that in Scotland and Wales it will be a great deal smaller than it is at present—not because the needs of the people will diminish, but because their ability, through advancing prosperity, to pay for their needs will increase. That would be lovely, but the enormous chasm which exists between standards of living and the enormous new demands rightly imposed on the Government by people in disadvantaged areas of Scotland and Wales would require the most massive explosion of new resources in those countries or in Britain as a whole in order to pay for meeting those needs.

Because there will be this continual deficit, there will be a temptation—indeed, there will be a justification—for the English taxpayer to say that those who have the power to tax themselves and whose power approximates to self-government should damn well get on with doing it themselves. This will be especially so if economic circumstances or political pressures are such as to make the English interest or English regional interests supersede that of the general United Kingdom interest.

7.45 p.m.

We shall be introducing into all political considerations an argument that has barely figured at all in British political dialogues and discussions. There has barely been a vote to be gained in this country, except among nationalist paranoiacs, throughout the time that we have had the modern pluralistic, parliamentary, elected democracy, on the basis of where a candidate comes from or the immediate interests he is trying to serve. We have had divisions on a class basis, but not on a geographic or nationalistic basis. The British people are firmly educated in and accept the idea of there being universal need met by universally collected resources, universally distributed on the basis of need, subject to appeal and representation in this House and the other organs which this House has set up. If that is changed, the fracture threatens.

We understand the invitation to resentment which the block grant will cause if it is the whole source of finance, but even that is a better system than one in which there would always be that extra and additional difference between Scotland existing and really living—I can invent the nationalist election slogans. I am sure that my hon. Friend the Member for Renfrewshire, West, with his command of poetry and inventiveness, could do much better.

That area of dependence will remain and will be as important, dynamic and irrecoverable, as if we were depending on the block grant system. We have to take into account the natural disposition of the English taxpayer to say that Scotland is, in the words of my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh), 90 per cent. self-supporting and self-governing, so let us give them the extra 10 per cent. of self-government because we do not need them in the way that we have needed them in the past.

These are all possibilities that we have to consider. We have to decide on the balance of disaster. That is what the Bill has forced us to do. It has shortened many of the options for the reform of our constitution and the democratisation of our system of representation. We have continually to decide between evils. The block grant is more subject to the collective wisdom of the people of Great Britain and their representatives and is not as intractable as the system advocated in the amendment. It does not open the door to self-government in the way that a self-financing procedure would do. It is only to be commended as the lesser evil.

My hon. Friend the Member for Berwick and East Lothian is committed to the idea of devolution, though not necessarily to this idea. I am committed against the idea. There is no need for either of us to disrespect the other. There is no need for either of us to continue our arguments. Indeed, we have exhausted most of them over the past three or four years. Our argument—I refer to my hon. Friends the Members for Berwick and East Lothian, Renfrew-shire, West Swansea, East (Mr. Anderson) and myself; Members on different sides of the devolution argument—is with the Government.

I am content to make do with the penny and without the bun. My hon. Friend the Member for Renfrewshire, West is prepared to make do with the bun and without the penny. But the Government want both the Denny and the bun. They want all the product of a devolved system, even seeking to advance, though they have neither the courage nor the inventiveness to propose, a system for self-financing in these Assemblies whilst trying to maintain a unitary system. They cannot do that. They can only respond to the fears voiced in this Chamber with naïve phrases, such as the one that was in the Bill when we started, about legislating against the break-up of the United Kingdom or, at a later stage, saying that resentment would not be provoked and that changes would not come about. Only those seeking to sustain the unsustainable idea of the penny and the bun—of having our parliamentary cake and eating our devolutionary bread—can possibly seek to take refuge in blithe phrases about the consequences of this form of devolution.

In the new politics that we introduce by the disparities of this system there are bound to be new political ideas, new political resentments and new relationships. Therefore, there cannot be profit for either the Scottish or the British people. Only the bandwagoners and political profiteers can gain out of that situation. Fortunately, we have only a few representatives of those populist ideologies in this place. But, even in their small numbers, they are too many.

Perhaps I may illustrate in a practical way without the grandiose references to constitutions, the total integration of our economy and the interdependence of our people which make the idea of a separate tax-raising system in Scotland a nonsense.

The people of Scotland benefit from the rates that the people of Bedwellty pay. When people from my constituency go to Scotland, they benefit from the rates that the Scots pay. We do not pay them specifically to benefit people in the rest of the United Kingdom, but involuntarily we make a general contribution to the public good for all citizens should they need to visit or to stay on a permanent basis in an economy which has been built by the people of that area. That is how integrated we are. That is what makes it different from federal and certainly from separate States. It is different to the extent of the economic geography of this country.

For example, there could be 10 motorways in Scotland, but not one would be any good if there were not another motorway running up from the South Coast of England, through the spine of England, to meet them. They would be roads from nowhere to nowhere. It would take a long time for the Scottish economy to justify itself on the basis of its internal communications. It needs integration with the remainder of the United Kingdom. It needs the motorways network and the telecommunications and railway links as a bond.

There could be no demand or justification for the development of road networks in Scotland or to West Wales unless they were linked with the ports and industries of the remainder of the United Kingdom. To think otherwise is a nonsense and is not to acknowledge the last 200 years or the next 100 years of economic history. That is the nature of the integration. To try to superimpose on that integration a disintegration in the form of a different system of taxation in Scotland is a nonsense. I think that even those who advocate such a system know it.

We are setting about compiling yet another power that was not seriously contemplated when we began this ill-fated journey into devolution this time last year. We are torturing ourselves over the power of tax raising. The debate will go on, but, even if granted, the right to raise revenue is a power that the Scottish Assembly would never use. We shall be in the ludicrous situation of adorning the Assembly with the power of raising its own finance at the margin or in general, if it wishes to do so, in the knowledge that that body will never dare further reduce its economic attractiveness by imposing any kind of additional surcharge.

To some extent, I am willing to let the Scots get on with it. My fear is that the moment that advance takes place, the idea of this hollow, superficial and vacuous freedom for different parts of the country to make surcharges, the Welsh—not the Welsh people, but those who would seek to administer Wales—might be infected, and the consequences would be an unmitigated disaster. We should be further disadvantaged in our bid to try to stimulate people's standards of living and attract industry. So in Scotland, the Assembly would have a power that it would never dare use. What is the purpose of doing that? The answer is to legitimise the Scottish Assembly, to give it "responsibility".

It is suggested that those elected to the Assembly will be so outrageously populist as to spend all the money in the block grant within the first 10 minutes and to leave the other 364 days 23 hours and 50 minutes to look after themselves. Would they be so stupidly irresponsible as not to acknowledge that the block grant was granted on the basis of demonstrated need by the constituent local authorities in Scotland and that therefore they would in any case have precepted much of the block grant?

The Assembly is to be endowed with all the superficial importance, pomp and grandeur of a national assembly. I tried to point out to my hon. Friend the Member for Berwick and East Lothian the distinction between this body and a local authority. It will have all the pomp and importance of a national assembly. It will have, not £1 billion, £2 billion or £3 billion to spend or even to have a major part in discussing, but a miniscule residue after all the local authorities have rightly taken up their needs.

We shall have a body with taxation powers that it dare not use. We shall have a directly elected body without any conclusive determining rôle over anything whatever. It will be left with the residual moneys that remain in the coffers after the local authorities, on the basis of demonstrated need, have taken what they need, just as they do now from central Government. That is what makes a nonsense of the whole proposition, and we further compound it if we go to the trouble of introducing any form of taxation-raising powers for the Scottish Assembly, let alone the tortuous fractions and decimal points suggested by my hon. Friend the Member for Berwick and East Lothian.

8.0 p.m.

Several hon. Members have attempted to draw an analogy with local authorities. My hon. Friend the Member for Berwick and East Lothian said that, because local authorities have always had a responsibility for raising a proportion of revenue, that resulted in a guaranteed responsibility. He also said that it resulted in an equilibrium of understanding and interdependence between local authorities and central Government. But the reason for that is that there are many local authorities. They have come together to form a negotiating unit, to ensure that what is sauce for the Somerset goose is sauce for the Yorkshire gander and that the rules which govern what is happening in Gwent are applied everywhere else.

They are responsible on a local basis. The essential and main moneys are made available because the local authorities in combination have been able to secure a sum of money from the Government on the basis of national priorities, national economic policy and universally applied standards of provision in health and education and many other spheres.

Local authorities are not national assemblies, and there are more than one or two of them. That is the difference, as I am sure those who have tried to pretend that there is no great significant difference are well aware. I hope that my hon. Friend the Member for Berwick and East Lothian and the Lord President will continue in their hesitation and make a virtue of their dubiety. I hope that they will continue to say that they cannot come to any conclusion. I hope that they will continue to express sentiments such as that in Command 6585 which states: Thorough re-examination has confirmed that no better method of devolving some revenue-raising power is available within the current framework of national and local taxation, but in the light of the comments received the Government have decided not to pursue this proposal. If future changes are made in the taxation framework, particularly for financing local government, which would make it feasible for the Scottish administration to supplement the block fund while still meeting the conditions set out in paragraph 108 of Cmnd 6348, the Government will be ready to consider incorporating the necessary revenue-raising powers in subsequent legislation. That is music to the ears of an anti-devolutionist. My right hon. Friend the Lord President is my favourite siren on many other issues, but he is on the rocks on this issue.

The great hope that we have of trying to sustain the unity of the United Kingdom, with all the advantages that has for the people of the United Kingdom, now resides substantially in the Government's lack of faith in their own proposals for devolution. That will carry us over this hump of taxation.

I hope that the main engines of democracy will continue to be local authorities which are democratic and local, together with a national Parliament which is sensitive and which does not pay regard to petty, parochial, nationalistic interests.

Mr. Russell Johnston

It is difficult to follow the hon. Member for Bedwellty (Mr. Kinnock), because for many of us the devolutionary debate has almost become ideological rather than political. Much of what the hon. Member said was of an ideological nature rather than a political nature.

The hon. Member referred to "responsibility" and the fact that revenue raising should or has been assumed to produce a greater degree of responsibility in the legislative or administrative body. That assumption has been made, as the hon. Member for Berwick and East Lothian (Mr. Mackintosh) said, by many bodies such as Layfield and in evidence by the Treasury to the Wheatley Commission, on which I sat. They both said the same. They said that without revenue-raising powers of at least a proportion of the money required there would be a consequent diminution of responsibility.

I shall tell the Committee of my experiences on a Scottish local government commission. We went to the Faroe Islands, which were governed by Denmark. We were taken to see a primary school. It was a not very prepossessing small, square, concrete building but the people were proud of it. They told us about the use to which it would be put, about its construction and that they were to use it in the evenings. We asked them who paid for the primary school. They said that the commune paid 60 per cent. of the cost. We asked who raised the rest of the money. We were told that 20 per cent. came from the Faroe Government—the islands have a population of about 37,000, similar in size to an old county council in England—and 20 per cent. came from the Danish Government. The commune consisted of about 800 people. They thought of the school as their own since they had paid for most of its construction.

By coincidence, I was in the Shetland Islands about one month later. We were taken to see a new primary school which had been constructed by way of a 90 per cent. rate support grant from central Government in Scotland. The people told me that the Government had finally got round to building it but they could never understand why they built it facing the prevailing wind. They said that they could not understand why there was no connecting corridor between the dining room and the kitchen area. There were many complaints because "they" were responsible and not the local people.

My point is that where the bulk of finance is provided within a community there is a considerable difference in the feeling of responsibility and price. That is true generally, and it would be true if there were an Assembly.

Mr. Buchan

The hon. Member is correct in his description of the situation in a commune. But he said that complaints were made in the Shetlands and that there was no sense of belonging. He said that the people complained that the school was facing the wrong way. But the school was built by the Shetlands and not by Edinburgh, which paid for it. The faults cannot be blamed on Edinburgh, the main provider of the money. The hon. Member contradicts himself.

Mr. Johnston

I am not contradicting myself. That is the last thing that I should do since I leave that to others.

I have tried to explain that the attitude is different when there are revenue-raising powers and when there are not. I give one example of many which have been confirmed by various bodies over the years.

Mr. Robin F. Cook

Surely the hon. Gentleman will accept that the same financial arrangements exist in the Shetlands whereby the education authority there would have to make about 70 per cent. of its education expenditure available from rate support grant with the commune having to meet the remaining 30 per cent. That 30 per cent. difference is not as dramatic as the hon. Gentleman is seeking to suggest.

Mr. Johnston

I have made my point and I do not intend to pursue it further.

I come now to the amendment moved by the hon. Member for Berwick and East Lothian, which we are now able to discuss. The Liberal view on this matter has been clear from the start. We favour revenue raising, and the amendment as tabled is almost the same as the proposition that we put to the Government in March and April 1977. It has three ingredients in it, just as our proposals had. Firstly, there is the ingredient of income tax. Secondly, in our case we proposed a 12½ per cent. levy on the revenues of oil landed in Scotland. The amendment is concerned with alcohol and tobacco duty, but the element is basically the same. Finally, there is an equalisation element.

I agree with the hon. Member for Berwick and East Lothian that the amendment is an attempt to discover a way of raising revenue which would work and would meet all the requirements which the Secretary of State outlined in the speech that the hon. Member quoted from the conference he attended. We understood that the proceeds from income tax and oil revenues would be roughly equivalent to expenditure on devolved services, so that the equalisation element would be fairly small, perhaps even smaller than that envisaged in what I might call the Mackintosh proposal.

Let me consider briefly each of these proposals, starting with the one on income tax. We still think that this is a viable proposition, but the hon. Member did not tell the whole story. He said that it had been indicated to him by the Treasury that, in order to have this capacity to change the rate, one would require extra expenditure of the order of £7 million and about 2,000 extra civil servants. The figure that I was given at the time we put our proposals forward was £8 million direct expenditure, but we were told that another £8 million indirect cost would fall upon business and that, therefore, the total would be about £16 million. The cost is therefore greater than was suggested by the hon. Member for Berwick and East Lothian.

Mr. John Smith

The hon. Member for Inverness (Mr. Johnston) is right about that. One of the reasons why the figures are different is that the information given by my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) came from a parliamentary answer from a Treasury Minister. But my hon. Friend asked for the cost of collecting tax from those employed in Scotland, not those resident in Scotland, and those are two different propositions. However, in his amendment my hon. Friend proposes the collection of tax from residents in Scotland, not from employees in Scotland. The Inland Revenue's general estimate is that for every pound that it costs the Revenue it costs the employer another pound. That is clear from the terms of Amendment No. 544, where my hon. Friend seeks to ensure that employers would be required to make special returns.

8.15 p.m.

Mr. Johnston

The cost, then, is about £16 million plus 2,000 additional civil servants, most of whom would inevitably be placed in England rather than Scotland. Whether that makes any difference or not, it is a fact to be registered. The Minister of State will confirm that in our discussions with him this was a considerable problem for us. It was not easy to argue on the one hand for a reduction in public expenditure and at the same time demand £16 million more just like that.

I think that the proposition that we put at the time was a sensible one. It was that when the Assembly was established the Government would be prepared to allow the Assembly to undertake the extra administrative cost if it thought that the capacity to vary income tax was worth the cost. There was a general willingness on the part of the Government to contemplate what I think were described only as some marginal areas of taxation, but the terminology was not as generous as I would have liked.

That is the problem we have to face. We have to consider whether it would be worth while, and I think that it would be. The Government's view was that it would not be. If the Government had agreed to state that they would be prepared to propose as a matter of policy to the first Assembly that they would be willing to implement such a proposal if the Assembly agreed to it, I would accept that. But the Government are not prepared to go that far.

These extra on-costs relate to the kind of tax system we have. If we did not have PAYE but had self-assessment instead, as exists in the United States, the on-costs would be far less. I agree with the hon. Member for Berwick and East Lothian that we in this country have an extraordinary reluctance to contemplate anything which is outside our boundaries as being in any way applicable to our situation.

The second element in our proposition concerned royalties on oil revenues. The hon. Member has plumped for assigned excise duties. The Government rejected the suggestion on oil royalties because they took the political decision that they wished energy to be a United Kingdom reserved matter. I still believe in the sharing of oil revenues, or a certain proportion of them. I accept that oil is not a long-lasting source of income, but it is not a bad proposal for regional purposes.

It is not good enough for the Government to wring their hands and say that they do not know what revenue-raising system can be devised, when a great many different systems are applied all over the world in a variety of situations. That argument does not stand up to close examination.

I come, thirdly, to the equalisation grant. The hon. Member for Berwick and East Lothian said that there was a political advantage in reducing the size of the equalisation grant as opposed to the block grant. Instead of negotiations about the whole block grant, there would be negotiations about a much smaller sum. Here I want to make brief reference—but reference none the less—to the many remarks that have been made about this presenting what I think the hon. Member for Bedwellty described as perpetual friction. The hon. Member said that the Scottish Exchequer—I suggest that that would be the word—would be in perpetual deficit. I do not accept that as a proposition. I think that things are much more flexible than that, over even the medium term.

Nevertheless, even if for one moment one accepts that in Scotland, even excluding the generating effect that the discovery of oil is likely to have on an economy which is more sluggish than the main powerhouse areas of the United Kingdom, the Midlands and the South-East, that situation is likely to persist for some time, with the lower average general wage levels and the like and, therefore, the larger need for expenditure on devolved services on the basis of need. This is the basis upon which these things have been done thus far. I do not really understand why it should change.

One must contemplate particularly the EEC dimension, which will be more and more important. Many may dislike this, but it will be very important. Already there is recognition in the Council of Ministers—only a couple of months ago—of the need to increase the size of the Regional Fund to correct regional disparities. If that attitude is growing on a European scale, I fail to see how the establishment of a devolved Assembly within the United Kingdom will create such tensions and dissatisfactions because of disparities of expenditure related to need when, in fact, there is a general acceptance and recognition throughout the EEC of the requirement to level out disparities on the basis of need. I just do not understand the proposition.

Mr. Donald Anderson (Swansea, East)

Surely the point made by my hon. Friend the Member for Bedwellty (Mr. Kinnock) was that in the European context there is not a national separatist element in France, Germany or other countries as there is in Scotland, and hence would come the friction which he has described.

Mr. Johnston

I have no doubt that the nationalist parties in both Scotland and Wales would make argument about any discrepancies that they saw. But I do not think that I would accept at all—goodness knows, I speak from the Bench of a minority party and as a person who has been used to being in a minority for a very long time, without, nevertheless, losing heart—that this would mean that the whole population would be gulled by this sort of argument, in the sense that was suggested this afternoon by the hon. Member for West Lothian (Mr. Dalyell), that all these things would be taken advantage of by clever propagandists and that people would be swept off their feet. I do not believe that, but it is an assertion and is something that I cannot demonstrate in any way in logic.

I shall not go over again the general propositions of the hon. Member for Berwick and East Lothian. I do not believe in repetition. They are basically the same as we made in the negotiations we had with the Government and are fairly soundly based. They demonstrate that it is possible, if the Government really wanted the Assembly to have revenue-raising powers—which I think it should have—that this could be done.

Mr. Sproat

Is it not essentially fraudulent to talk about the Mackintosh scheme as being revenue raising? What the hon. Member for Berwick and East Lothian (Mr. Mackintosh) is doing is saying that Scotland needs, as it were, £100, but that instead of giving it in the form of a block grant, which the hon. Gentleman suggests, we should call the first £30 the equivalent of money raised in income tax in Scotland, we should call the next £30 the equivalent of 30 per cent. of money raised on whisky, tobacco and oil, and we should top up the other third from the Treasury. That is not revenue raising. There will be no power for the Scottish Assembly to vary the rates and the manner in which revenue is raised. This is just a pretence to the Scottish Assembly that it has revenue-raising powers when, in fact, every key control of that money will rest with the United Kingdom Parliament.

Mr. Johnston

It does not go as far as I would wish it to go. In a federal situation it would go much further. But even the scheme proposed by the hon. Member for Berwick and East Lothian—the income tax proposal in the first part—involves the capacity to vary the rate. [Interruption.] We shall get into trouble if the hon. Member for Aberdeen, South (Mr. Sproat) makes sedentary interjections. The intention would be to contemplate various alternatives. That was the object of the hon. Member for Berwick and East Lothian.

Finally, I should like to return to another matter that was not directly referred to by the hon. Member for Berwick and East Lothian but is of great importance and has been touched on by a number of hon. Members. That is the question of a formula. People have talked about the Goschen formula. Here, in arguing about the equalisation, we took the view with the Government that it should be based on a formula over a period of years, and if in the end the Government would not budge on the question of revenue raising we argued equally that the block grant should be based on a fixed formula and should last for the span of a Government or, rather, of a Parliament—in other words, for four years, the fixed span proposed for the Assembly.

The Minister indicated in the document which was subsequently produced that this also is a matter that the Government would regard sympathetically. Contrary entirely to what I suppose the hon. Member for Aberdeen, South would believe—I should be obliged if the Minister would refer to this matter—I think that the annual haggle would exacerbate friction and that one should try to get away from it as far as one can. The best way of doing that is to have a fixed formula agreement running for a period of years. This would mean that the Assembly would have a greater degree of leeway in making its own decisions and its own determinations.

That is the whole point of devolution. That is the point that the hon. Member for Aberdeen, South, whose honesty in these matters I in no way dispute, fails to grasp. The same goes for the hon. Member for West Lothian. The whole point of having an Assembly is to allow it to do certain things in different ways which may be more appropriate in Scotland than they are elsewhere. Equally, and further, the point is to allow the Scottish Office, which is not at all well susceptible to democratic control at present, to be much more under scrutiny than it has been in the past.

I believe that it is for the best that everyone should know what is spent in each corner of the kingdom. When I interrupted the right hon Member for Cambridgeshire (Mr. Pym), when he was speaking on the last amendment, it seemed to me that he was saying that it is all right if the differential between expenditure and devolved services between England and Scotland is 20 to 25 per cent., or whatever it is reputed to be. The right hon. Gentleman looks puzzled. The figure of 25 per cent. was produced by the hon. Member for Glasgow, Cathcart (Mr. Taylor). The argument seemed to be that it is all right if no one knows about it—that if it is not discussed it will be all right, and it will go on.

I believe that people should have the facts openly in front of them. If this is done and the facts are put clearly before them, with explanations that things are being done because of need, I think that in our democratic society people will accept them.

I believe that the capacity to raise money in this way will assuage the worries, troubles and fears—often unjustified—of people in the North-East and North-West of England that somehow or other the Scots will run away with it all. That is not the object of the exercise. The object is to create in Scotland more democratic decision-making which will result in better government in Scotland.

8.30 p.m.

Mr. Peter Doig (Dundee, West)

I shall make one or two quick points, because I know that a number of hon. Members are anxious to speak in the debate.

The hon. Member for Inverness (Mr. Johnston) spoke about the power to impose different rates of tax. If this power were to exist, what would happen? Let us suppose, for example, that there were to be a different rate of tax on whisky in Scotland from that in England. If whisky were to be dearer in Scotland, no whisky would be sold there because people would cross the border and buy in England. It would then be necessary to have Customs officers not just on the border but at every airport, every railway station and every port. There would have to be Customs officers at every one of these places immediately there was any considerable difference in the rate of taxation between England and Scotland.

The same sort of situation would arise if it were decided to change the rate of income tax in Scotland. If the rate of income tax were to be higher in Scotland, what would be the first thing to happen? Taxation is based on where the head office of a company happens to be. In such an event, head offices in Scotland would immediately pull out and transfer to somewhere in England, and there would be an outcry about that. The same argument applies right through the list of possible taxes. Without a Customs organisation, it would be utterly impossible to have separate rates of this sort, if we have them, we shall be heading for nothing but trouble. There will be smuggling and all sorts of things happening. Any saving will be more than taken up by the extra policemen and Customs officers required.

This idea is just sheer nonsense. The debate has already shown the stupidity of the whole Bill, as far as I can see, because this is what comes out of it. When we try to get down to what it will be practical for the Assembly to do in the way of raising revenue, we find that there is nothing practical at all.

Mr. Dalyell

Hear, hear.

Mr. Doig

That is what we find when we go into the details. We shall eventually be forced back to a fixed formula, such as the eleven-eightieths that we had in the past, and if any change is to be made the argument will have to be supported with facts, whether it relates to the number of pensioners, the number of schoolchildren, the number of people requiring supplementary benefit or whatever it may be. There has to be a substantial shift in numbers before a fixed formula can be changed. That is what happened before, and that is what would undoubtedly happen again.

I was surprised when my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) said that the more block grant was given to local authorities, the more they were dependent on the central Government, and the less the block grant the less dependent they were. That is absolute rubbish. It is the very opposite of what happens. When local authorities had a block grant which they could spend on anything once they got it, it was perfectly simple, but immediately the block grant was reduced and local authorities started to get specific grants for specific things they became much more dependent on the central Government.

I mention my own city as an example. We required ordinary primary schools and secondary schools. We also had a great need for nursery schools. Because we happened to have a greater need than other areas in Scotland, we were granted three nursery schools by the Scottish Education Office and three nursery schools were built. Had we refused them, it would not have meant that sum of money coming to our city. It would have gone to the next area which had the greatest need for nursery schools.

But what happened after the nursery schools were built? The local education authority then decided that it would not use them as nursery schools. It decided to use one as a primary school, and the last time I heard the other two were still standing empty. That is the sort of thing we get when we come down to this detailed type of interference. If the Assembly is to have any useful function, it is far better to give it something on a fixed formula. We should say "There is all the money you are getting. You divide it up."

I know perfectly well that the Assembly would not dream of giving a smaller old-age pension in Scotland than is being given in England. There are a lot of other things that it would not change. But it might decide that it ought to spend more money on railways and less on road transport, or vice versa. That is quite possible. There are all sorts of things of that kind which the Assembly might use its discretion and power to vary.

However, there are certain things that it could not vary because people would not allow it to do so. Things like pensions, supplementary benefit and payment of sickness benefit are already established as being the same all over the country. No section of the public would allow the Assembly to alter those types of payments. The Assembly would be compelled to pay them.

For the sake of argument, let us suppose that the Assembly could vary those payments. Let us suppose that it decided to increase old-age pensions. What would be the result? A great many pensioners now living in England might decide that they could get a higher pension in Scotland and move to Scotland.

Mr. Crawford

Hear, hear.

Mr. Doig

What would be the effect? The 5 million people in Scotland would have to pay far more pensioners than they are now paying, and that would mean a lower standard of living for the rest of the Scottish people. Would hon. Members still be saying "Hear, hear"? The people who voted for them would not. We come back to the details of the matter, and the more one gets back to the details, the more one realises how ridiculous the whole thing is.

I am only sorry that at the last General Election my party pledged me to support the Bill; otherwise I would never have supported it to even this length. But the fact is that I have already made speeches in my constituency urging people to vote against devolution in the referendum. Frankly, if I listen to many more debates like this I shall be tempted to vote against the Bill on Third Reading, never mind the referendum. When we come down to the details of the Bill, and when we start to consider what will happen, it becomes absolute nonsense.

Mr. Dalyell

Is it not also the case that the more people know about the Bill, the less they like it?

Mr. Doig

That is absolutely true. The unfortunate thing is that the Bill could pass simply because the only people who really know about it are the political parties. Each of the political parties for different reasons does not want it in reality. They want it to come about only for political reasons. My party does not really want it. The Conservative Party did not want it but panicked because it had already lost seats. My party panicked because it thought that it would lose seats although it had not actually lost them. The nationalists do not really want the Bill, because they want complete independence. We end up with no one really wanting it, yet somehow or other it looks as if we shall be landed with it. It is absolute insanity.

I have now reached the stage where I am seriously wondering whether I ought to support the pledge given during the last General Election and vote for the Bill on Third Reading. This amendment has shown up the folly of the Bill.

Mr. Mick Buchanan-Smith (North Angus and Mearns)

I shall take up a little later the point made by the hon. Member for Dundee, West (Mr. Doig) on the question of our having this Bill at all, which has been the conclusion reached in almost every contribution to this debate. I wish first to deal with the application of the amendment.

I am grateful to the hon. Member for Berwick and East Lothian (Mr. Mackintosh) for giving us this opportunity to discuss this matter. We are all aware of the deficiencies of the amendment, partly because of the rules of order. Although some of us may support revenue-raising powers, it is agreed that this amendment is not the ideal form in which this principle should be encompassed. However, the amendment deals with the spirit of the principle of tax-raising powers and has enabled us to discuss this matter fully. It is easy to attack the amendment on points of detail, but we are able to examine the principle of the matter. At an earlier stage time did not allow adequate discussion of the question of legislative powers in respect of tax-raising, and this debate is to be welcomed.

If we were to have a limited scheme of devolution, such as the kind of scheme suggested by the constitutional committee headed by Lord Home of the Hirsel in which one has an elected Assembly but where the Executive to which that Assembly is answerable is part of the Executive of the United Kingdom Parliament—in other words, where it is of a consultative nature—the best basis for financing the process is by means of a block grant or some kind of equalisation grant such as that given to local authorities. In my view, when one moves to a directly elected Assembly which supports its own Executive, it is right that we should debate and consider tax-raising powers. I do not intend to repeat earlier arguments, but if we are to have that responsibility and are to consider accountability, we should also consider whether some form of revenue-raising power is appropriate. I subscribe to the principle that, given a scheme of this nature, it is better that such an Assembly, with its Executive, should be responsible and accountable.

What has disappointed me in this debate is that many of the arguments have been coloured by attitudes governing whether the speaker is in favour of or against devolution rather than being directed towards whether, given an Assembly of this nature, it is or is not right to give to that Assembly revenue-raising powers.

I should have hoped that, whether one was for or against the main proposal, we might be able to look at this argument on its merits. If there is an Assembly with its own Executive, and if that Assembly is to be a responsible and accountable body, it is right for us to consider the question of revenue-raising powers as proposed in the amendment before us, since, if it does nothing else, it applies a discipline which such a body requires.

8.45 p.m.

I turn, then, to the question of how it should be done. The Government have said that they were in favour, but then all the practical difficulties were presented. This is where I believe that we are in a vicious circle on the whole question of devolution. One of the reasons given for not having revenue-raising powers through, for example, income tax is that we are a unitary State. That argument was put quite fairly and logically by the right hon. Member for Down, South (Mr. Powell).

The other argument follows from the fact that we are a unitary State, for not only are we a unitary State but we are a highly centralised State. Our system of income tax and its collection has become a highly centralised piece of machinery. We have much the same in such matters as vehicle licensing, social security and many of the benefits under the social security system. Because we have all this centralisation of administration, it is difficult to provide the sort of decentralisation which those such as myself wish to see through devolution. It becomes much less practical and far more difficult to achieve what I believe to be a proper solution.

The Government have put forward their argument against a revenue-raising power, and I appreciate what they say, but in advancing that argument they are merely demonstrating that the income tax system and its machinery present one further manifestation of how centralised we are and, because our system is so centralised, how difficult it is to make changes.

I should not like to see the fact of centralised machinery used as an obstacle in the way of sensible devolution. Indeed, if we make it an obstacle to sensible devolution, we should probably do better not to start on it at all and accept the maintenance of the highly centralised State which we now have. I should support the amendment, however, or certainly the principles behind it, because I believe that it demonstrates yet one other way in which we can try to decentralise some of our machinery of government.

Mr. Sproat

I put this in a neutral questioning way to my hon. Friend. When he says that he supports the principle behind the amendment, does he understand that the top amount of money which the Scottish Assembly could get in any way, by income tax plus the 50 per cent. of excise duties and plus the equalisation or however it might be can never, according to the amendment, be greater than the percentage of public expenditure which Scotland receives now, namely, 125 per cent., or whatever it is? If he says that I am wrong about that, can he explain how we could get more than we are getting in public expenditure at the moment?

Mr. Buchanan-Smith

I shall not enter into that question because I do not think it important in this context. I am taking the matter within the narrow terms of the amendment, and I think that the mere fact that the Assembly and its Executive would have the power to vary taxation would in itself introduce an important discipline. After all, one of the main reasons given for not going over to a complete Government grant or block grant system in local government is that even the small and declining element of ratepayers' contribution towards expenditure for which local government is responsible is regarded as enough to give the degree of responsibility and accountability which is essential. For my part, I should like to see a larger element of discretion and responsibility in relation to revenue raising within the budget of a Scottish Assembly.

I return to the point with which I started. I am less concerned with the detail and the various percentages than with the principle of a revenue-raising power, and it is on the question of principle that I approach the matter tonight. However, I make one last point regarding the cost. The hon. Member for Berwick and East Lothian fairly mentioned the cost in terms of money and civil servants. It was amplified later in terms of detailed resources what it would mean. I accept that there is cost involved in this. However, there is cost involved in any change of this kind.

This is where we come to a subjective judgment of whether additional costs and prices are worth paying. I believe that two prices at least are worth paying, and that is why I have supported devolution. The first is the price of maintaining the United Kingdom. There is a price worth paying for that. By making the Assembly meaningful and responsible, if it costs more money to make it possible for the Assembly to raise its own revenue, within limits that is a price worth paying.

The second price which is worth paying is that, much more broadly within the United Kingdom, we are failing in so many ways, and it is worth paying a price to right a number of wrongs. Our economy is failing. Our system of government is failing. No one can say that we are still a leading country. If we are prepared to tackle these considerable problems, of which devolution is only one aspect which needs tackling and reforming, there is a chance of regenerating not only the economy but the very life of the country in so many different ways. If that costs money and resources, I still believe that it is a price worth paying and one which I am prepared to pay. If we do not achieve these ends the operation is not worth embarking on at all, and that is where the subjective judgment must come into our consideration of these matters.

This is a great opportunity. The centralisation of our tax system should not be an excuse for not giving this Assembly the necessary revenue-raising powers if we believe that they are the right kinds of powers. If they reduce conflict in revenue raising, as I believe they can, they are powers worth giving. I believe that by giving the Assembly powers to raise income tax, those powers may be used as a catalyst to break into the present vicious circle of centralisation. I regard this amendment as an opportunity to construct and improve upon this Bill rather than one to destroy it.

Mr. Robin F. Cook

Normally I would begin by saying that I rise to support the principle of the amendment. However, in these unusual circumstances the principle of the amendment has been gutted to bring it within order. Therefore, I rise to support the motivation behind the original attempt to table the amendment, not because I regard it, even in its original form, as a satisfactory way of resolving the problem but because the present position in the Bill is even more unsatisfactory.

It is a deeply unsatisfactory and unstable proposition that we should create an elected Assembly which is given power over the raising of revenue but no responsibility for finding the funds with which to meet its expenditure. It is a danger which can be illustrated by referring to the central pages of The Scotsman of last week which contained three remarkable articles. There was one by the hon. Member for Edinburgh, Pent-lands (Mr. Rifkind) in which he expounded at some length the crisis which universities in Britain faced as a result of the cuts in public expenditure and demanding a substantial increase in the cash available to those universities. Immediately before that article there was a report of an interview with the hon. Member for Glasgow, Cathcart (Mr. Taylor) in which he demanded in vigorous and forceful terms additional money to combat crime and to pay the police forces in Scotland. On the opposite side of the page, there was a very long leading editorial by The Scotsman demanding the restitution of the regional employment premium in Scotland to maintain job prospects in Scotland.

I am tempted to make the cheap party political point that the two articles came from hon. Members who consistently have voted for public expenditure cuts and that the editorial came from a leader writer who consistently has applauded every attempt by the Government to restrain public expenditure and criticised every attempt by them to increase public expenditure. However, that would be unworthy of this debate, and it is not a matter which concerns us. What does concern us is that these three separate propositions for increasing public expenditure came from hon. Members and from an editorial writer who are all ideologically committed to restraint in public expenditure and ideologically opposed to an increase in public expenditure.

In the present circumstances, and under the present constitution, one can contain and check demands for increased public expenditure because these same three people have to persuade the Government to increase public expenditure, while the Government know that they have to persuade the electorate to meet the additional taxation flowing from such an increase.

But in the Scottish Assembly as proposed under this Bill, what would be the situation? The universities are not to be devolved, but the rest of education is. When the hon. Member for Pentlands rises in the Assembly and demands more money to meet the crisis in Scottish secondary schools, who will say to him "We should not do this because it will increase public expenditure and thereby taxation?" When the hon. Member for Cathcart rises in the Assembly to demand more money to fight crime in Scotland, who will rise and say "We should not do this because it will have consequences for public expenditure"?

Clearly, the Scottish Executive is most unlikely to say it, because the main test of any Scottish Executive will be how successful it is in screwing more money out of the Westminster Parliament and Government under the present arrangements. Earlier, the hon. Member for Canterbury (Mr. Crouch) said that he was prepared to trust the people and leave it to the wisdom of the Scottish electors. But, of course, the competing claims of the parties in the election to the Assembly will be about who will be able to dun the Westminster Parliament and Government into giving the Assembly the most money. That will be the main decision before the Scottish people, and it will be perfectly rational for each elector to vote on the basis of which party he believes will screw most money out of Westminster, because he knows that the taxation consequences for him will be relatively small, since he will pay only one-ninth of the additional taxation flowing from that additional public expenditure. In that context, it will be rational for Scottish electors to vote for the party that will screw most money out of Westminster, and for the parties to compete in the election on that basis.

Not only are we making it more likely that the Assembly will demand more money by the way in which we are declining to give it revenue-raising power; we are also making it more difficult for this Parliament to concede it. The hon. Member for Inverness (Mr. Johnston) asked how the situation would be different from the present arrangement, and why should it be more difficult to maintain high levels of public expenditure in Scotland in future than at present. The answer is in Clause 46, which, although it is before us, there is manifestly not the slightest possibility of our debating it.

Clause 46 provides that the block grant will be subject to affirmative resolution of the House of Commons. In contrast to the present position, the expenditure for Scotland—the subsidy for Scotland from the central Government—will have to be approved by the House of Commons, arguably on a vote, when each Member from an English constituency knows that he will have to justify to his constituents his voting for an order which creates higher public expenditure in Scotland than in many English constituencies. That is why it will be much more difficult for this Parliament to accede to the additional demands which are bound to come from the Scottish Assembly.

Therefore, if we are to have the Assembly—and I have my doubts of that —I believe it is important that it should have revenue-raising power. I therefore propose to vote for the amendment on the basis outlined by my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh). I shall vote for his amendment to give the Assembly the right to reduce taxation, and in doing so will be demonstrating to the Government that I am in favour of the proposal that the Assembly should be able to increase taxation. It is a particularly curious position that we are in, but on that basis I will vote for the amendment. The position has not been of the making of my hon. Friend the Member for Berwick and East Lothian but it is symbolic of the position the Scottish Assembly will be in in that we are faced with this test of principle concerning the right to reduce taxation rate than to increase it.

9.0 p.m.

There are a number of grave limitations in the amendment. Although it attempts to give a right to raise additional taxation, it is a severely limited right. Even if the Assembly was to increase income tax by 5p, which would presumably be within its competence—and I do not imagine that any hon. Member would suggest that a Scottish Assembly is likely to increase income tax by more than 5p over the United Kingdom rate—that would produce an additional revenue of only £200 million, barely 10 per cent. of the money it would get under the block grant.

Mr. Percy Grieve (Solihull)

Has the hon. Gentleman considered the possibility that the Assembly might drastically reduce taxation and thereby turn Scotland into a tax haven? What would be the effect of that?

The Chairman (Mr. Oscar Murton)

Order. Before we go too far along that avenue on general principle, I must remind the hon. Member for Edinburgh, Central (Mr. Cook) that we are discussing either the status quo or a reduction in money raising but not an increase.

Mr. Cook

I am obliged to you for your guidance, Mr. Murton. It is difficult for those speaking subsequently in the debate to refer to the arguments put forward by my hon. Friend the Member for Berwick and East Lothian when, as the Committee will be aware, he referred primarily to raising rather than reducing taxation. I would have serious grounds for concern at the idea of Scotland becoming a tax haven. It is presumably possible within the terms of the amendment, although it is more likely that the Assembly will find itself struggling with the consequences of financing additional services rather than providing tax handouts for the Scottish people.

There is an additional reason for concern about the amendment. It is unsatisfactory that the amendment suggests a fixed proportion, that the cost should be on a fixed formula basis. The difficulty with any such basis is that it has a conservative effect. Such a method would tend to freeze the level of public expenditure at the proportion at present operating between Scotland and England. It would also have the rather curious effect that, were the United Kingdom Government to seek to increase expenditure on United Kingdom affairs, there would, presumably, be an automatic increase in Scottish expenditure to preserve the fixed proportion.

I am sure that you, Mr. Murton, will have seen the report in this morning's papers that the Government propose to increase defence expenditure as a result of an approach from the office of the NATO Secretary-General. If this happens it will have the curious effect that equalisation grants paid to Scotland under the formula would have to be increased to keep Scottish public expenditure in the same proportion as other public expenditure as a result of the additional money being spent on defence. There may or may not be a case for increasing the money spent in Scotland, but it cannot be said to depend upon approaches from the Secretary-General of NATO or the particularly stern tone with which Dr. Luns may address the Prime Minister of Great Britain.

I was intrigued by the attempt of my hon. Friend the Member for Berwick and East Lothian to salvage the point about the 2,000 additional civil servants for his argument by saying that this would bring additional employment in Scotland and other areas of the United Kingdom. I shall be interested to see, during the referendum campaign, in whose pamphlets the figure of 2,000 additional civil servants appears. I shall be extre- mely surprised if those who are to argue for a "Yes" vote put in their pamphlet that one of the advantages of the Scottish Assembly is that it will require 2,000 additional income tax officers. But I can guarantee that when the "No" pamphlet goes round one of the factors that we shall certainly point to is that there will be a requirement for 2,000 additional clerical officers in the Inland Revenue, and presumably 2,000 additional clerks in private industry to carry their share of the burden. I do not think that that is an argument for the Scottish Assembly that will commend itself to the Scottish people. If anything, it is a strong argument against the Assembly.

All these are nitpicking points of detail. The profound argument against finding any reasonable and practical form of tax-raising or tax-reducing powers for the Scottish Assembly is that we are in a small State with a highly integrated industrial economy, and that those who live in each Hart of the State have been accustomed to these arrangements for the past few centuries. The Act of Union predated the arrival of income tax by centuries. The people in Scotland have always been accustomed to Haying the same rate of income tax as the people in England.

It will not do for my hon. Friend the Member for Berwick and East Lothian to produce analogies with Canada and the United States, because in those countries there are very large land masses with much less integrated economies, and with a historic tradition in which the different States became federated together rather than split apart having been together. Therefore, the people have always been accustomed to paying different rates of taxation.

That is the main reason why every attempt to find different forms of tax-raising or tax-reducing powers for the Assembly has foundered on the question of political acceptability. I remember my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) two years ago putting forward a proposal that the one easy, practicable and cheap way of giving revenue-raising or revenue-reducing powers to a Scottish Assembly would be to give it the right to vary the tax on hydrocarbons. That proposal ran into immediate opposition because of the political consequences of having a higher petrol duty in Scotland than in England at the very time when the debate in Scottish politics is about whether the Assembly should have control of Scottish oil revenue. It was so politically unacceptable as to kill the idea of that as a separate power for the Assembly. That is where all attempts hitherto have failed.

My hon. Friend the Member for Berwick and East Lothian referred to one of a number of appeals by my right hon. Friend the Secretary of State for viable schemes which were politically acceptable and administratively feasible. As far as I am aware, my right hon. Friend has not received one which meets both those tests. It would be interesting to know whether the international conference of economic experts to which my hon. Friend referred was able to come up with one acceptable scheme.

Therefore, one is driven to the following conclusion. My hon. Friend made a very forceful and cogent case for saying that any devolution to a Scottish Assembly must be accompanied by tax-raising or tax-reducing powers. He must then face the corollary that if we are unable to come up with a scheme which is both administratively feasible and politically acceptable he must reconsider his position on the Bill, as he has said that such a scheme is essential. If we are driven to the conclusion that what is essential is in practice impossible, we must address ourselves again to the main question whether this concept is feasible at all.

Mr. Crawford

I am sorry that the hon. Member for Berwick and East Lothian (Mr. Mackintosh) is not here. He made a lucid speech, was generous in giving way and set the tone of the debate. I am also sorry that the hon. Member for Bedwellty (Mr. Kinnock) is not with us. I only hope that one of my hon. Friends will be as fortunate in catching the eye of the Chair and being able to make a half-hour speech on behalf of our friends in Plaid Cymru on the Wales Bill as the hon. Gentleman was in making a half-hour speech against this Bill.

Several Hon. Members

rose—

Mr. Crawford

No, I will not give way.

The hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) said that devolution would strengthen the unity of the United Kingdom. I appreciate the philosophy behind his remarks, but we in the Scottish National Party believe that the existence of three equal nations will strengthen the friendship of the people of the British Isles.

Mr. Powell

Like Ireland, for example.

Mr. Crawford

I cannot cope with interventions from a sedentary position.

Mr. Powell

I shall stand up and say it. There is the example of the independent Irish Republic. Look at the friendliness it has for the United Kingdom!

Mr. Crawford

The independent Irish Republic was born out of very unfortunate circumstances, as the right hon. Gentleman knows. There are several reasons why the friendship there is not as great as that which will exist between Scotland and England after Scottish self government.

The Chairman

I think the hon. Member is just about to embark upon the question of friendliness and unfriendliness. He must be allowed to develop his argument along the lines of the amendments.

Mr. Crawford

The Scottish Assembly, as envisaged in the Bill at present, is a financial eunuch. It is also a eunuch in other respects.

Mr. Fairbairn

rose—

Mr. Crawford

No, I will not give way. Hon. Members will have to contain themselves when a representative of the Scottish National Party is making a point. I know that they do not like it. The hon. Member for Bedwellty said he would be glad to see fewer hon. Members from the nationalist parties.

The Scottish Assembly is a eunuch in industrial and political terms and in terms of higher education. Perhaps most important of all is the fact that after its establishment its funding will be the staff of its political life. The English House of Commons is very jealous of its tax-raising powers. Indeed, it was a namesake of the right hon. Member for Cambridgeshire (Mr. Pym) who fought very hard against the then King for tax-raising powers—[Hon. Members: "He fought against tax-raising powers."] I take the point. He insisted that the House should have the right of financing over the King. [Hon. Members: "Wrong again."] What was true for the English Commons in the seventeenth century will also be true for the Scottish Assembly in the latter years of the twentieth century.

The hon. Member for Inverness (Mr. Johnston) referred to the Faroe Islands. I refer to the Isle of Man. On Sunday night the Chairman of the Executive Council of the Isle of Man, Mr. Clifford Irving, said that the one thing that the Isle of Man regarded very seriously was—

Mr. Dalyell

Birching.

Mr. Crawford

That is the sort of remark we expect from the hon. Member for West Lothian (Mr. Dalyell). If it is as he says, it certainly should appeal to the hon. Member for Glasgow, Cathcart (Mr. Taylor). The point made by Mr. Irving was that the Isle of Man regarded very seriously the right of its own taxation. The Leader of the Opposition said in Glasgow yesterday that she was a "passionate devolutionist". She also said that independence and autonomy were necessary prerequisites for industrial enterprise.

Dr. M. S. Miller

I also listened to that broadcast by the Chairman of the Executive Council of the Isle of Man. He made a great point of the fact that the Isle of Man has only 20,000 people and that there is a tremendous difference between permitting things for an island of 20,000 and a nation of 5 million, as is the case with Scotland.

Mr. Crawford

I do not think that the chairman would say that.

Mr. Fairbairn

He did say that.

Mr. Crawford

But the chairman would know that there are 55,000 people on the Isle of Man.

The right hon. Member for Down, South (Mr. Powell) referred to the Irish Republic. With independent taxation powers and political and economic autonomy, the Republic is now the fastest-growing economy in the EEC. I suggest that a self-governed Scotland might be able to emulate our cousins in Ireland.

9.15 p.m.

As the Bill stands—the right hon. Member for Down, South made this point—the Assembly will have far smaller financial powers than will the smallest district authority in Scotland. The Bill will give the Assembly seeming financial responsibility, but without financial power. It will make a mockery of any economic ministry which the Assembly wished to establish. This should not be a matter of Westminster giving concessions. It should and shall be a matter of the Assembly taking upon itself that which is its by right.

As the Bill stands, an Assembly Minister of Finance will have no real powers. It will be impossible to establish a Scottish Treasury in the proper sense of that word or to pump financial blood into the body politic and the economy of Scotland. All that the Assembly will get is an anaemic transfusion, in the form of a block grant, of its own finance back to itself. We shall be getting what is our own and we are being told to be grateful for the gift of what is ours by right. If this stands, it could lead to recriminations between Edinburgh and London. These will inevitably arise because Scotland's economic problems are different from those of England.

The hon. Member for Aberdeen, South (Mr. Sproat) is fond of quoting the differences between Liverpool and Glasgow, but the unemployment rate in Scotland is considerably higher than that in England.

Mr. Sproat

But that is not true as between Glasgow and Liverpool.

Mr. Crawford

The hon. Gentleman is changing his ground. He used to compare Merseyside and Strathclyde.

Mr. Sproat

Will the hon. Genteman give way?

Mr. Crawford

No.

I should like to look now at what might be, what could be and what assuredly will come to pass. The hon. Member for Cathcart will be interested to know that during the recess I was talking to the well-known Edinburgh-based financier, Mr. James Gammell. He and his colleagues were bemoaning the takeover of two Scottish investment trusts by the pension funds of the National Coal Board and British Rail. Mr. Gammell said that confidence in the financial world in Scotland and elsewhere was a fragile thing and that if more Scottish investment trusts were threatened there would be a serious dent in the independent vigour of the Scottish financial world.

I have also spoken to the deputy-chairman of the Association of Scottish Investment Trusts in Dundee, Mr. G. A. Stout. He went further and said that Scottish Investment Trusts represented the thin end of the wedge and that without self-government almost all Scottish business and finance would be controlled south of the border, as our industry is already.

Mr. Teddy Taylor

Will the hon. Gentleman give way?

Mr. Crawford

If the hon. Member for Cathcart has a problem, let him write to me and I shall be happy to give him an answer.

I am trying to make a serious point. The hon. Member for Dundee, West (Mr. Doig) said that if there were a Scottish Assembly and independence, British companies in Scotland would pull up their stakes and leave. Sadly, there are few large companies with headquarters left in Scotland. The hon. Gentleman and my hon. Friend the Member for Dundee, East (Mr. Wilson) are lucky that some of them are based in Dundee.

I am not saying that the granting of financial responsibility to the Scottish Assembly will change things overnight, but the existence of an Assembly with real taxation powers and the establishment of a Scottish Treasury will create a climate of financial confidence which will resist the takeover of Scottish financial institutions. I submit that we cannot maintain a climate of financial confidence and well-being in a country which has no industrial or independent political and economic muscle.

Mr. Teddy Taylor

I do not want to write to the hon. Gentleman. Indeed, he will be aware that I have written to him several times. Unfortunately, he has not replied to me. The hon. Gentleman referred to the Association of Scottish Investment Trusts and what it suggested could not be done without self-govern- ment. We have already had public discussions about whether the banks and insurance companies have expressed themselves as being in favour of independence. Has the Association of Scottish Investment Trusts expressed any view whether it would be good or bad for itself or for Scotland if the policy of separation were accepted?

Mr. Crawford

The hon. Gentleman misheard me. I said that Mr. Stout said that the Association of Scottish Investment Trusts was but the thin end of the wedge and that, without self-government, almost all Scottish business and finance would be controlled south of the border. That is the answer to his question.

Mr. Teddy Taylor

I shall write to the hon. Gentleman.

Mr. Crawford

If the hon. Gentleman would like Mr. Stout's address, I shall give it to him. Mr. Stout is the general manager of the Alliance Trust Company, Meadow House, 64 Reform Street, Dundee.

Mr. Teddy Taylor

What is the postcode?

Mr. Crawford

The postcode is DD1 1DG.

Amendment No. 543 does not go as far as the Scottish National Party would wish. Our solution is contained in new Clause 7:

1. "(1) There shall be established a Scottish Treasury to which shall be paid all taxation deriving from companies, corporations, institutions, individuals, and other bodies operating or resident in Scotland.
2. (2) The Scottish Treasury shall be the repository of all minerals deriving from mineral resources situate in the UK sector of the North Sea north of a line 55°5′.
3. (3) The Scottish Treasury shall pay"—

The Chairman

Order. The hon. Gentleman is abusing the patience of the Chair by reading an amendment which has not been selected.

Mr. Crawford

I apologise, Mr. Murton. Our solution is that all moneys should be paid into a Scottish Treasury and that it should pay to Great George Street those moneys required for non-devolved purposes.

The hon. Member for Berwick and East Lothian made the point that we had all been asked by the Secretary of State to suggest solutions to this so-called intractable problem of taxation. I suggest that our solution has several beautiful and simple advantages. The first is that it is flexible. It would be able to cope with any diminution or increase in powers given to or taken away from the Scottish Assembly. In other words, it would be a self-controlling regulator.

The second advantage is that its application does not depend on the eventual details of what will or will not be devolved to the Assembly in the Bill. The third is that it will avoid any possible recriminations between Edinburgh and London over the size and timing of the negotiations of the block grant. The fourth is that it will tend to avoid the recruitment of armies of civil servants. The fifth, and most important from the SNP's point of view, is that it will pave the way for the financial settlement when full self-government comes.

Needless to say, the Secretary of State rejected that proposition as not being serious. Perhaps he does not like a simple solution to a simple problem. I assure him that the Scottish National Party is serious. I make this point because hon. Members have talked about the SNP disrupting the Assembly. We have heard suggestions about not putting up council rents and so on.

As has been pointed out, particularly by my hon. Friend the Member for Clackmannan and East Stirlingshire (Mr. Reid), the Scottish Assembly will take unto itself those powers that the Scottish people wish it to have—no more, no less. The House of Commons will not determine those powers. The finance required by the Scottish Assembly will be that needed to run matters devolved to the Assembly by the will of the majority of the people of Scotland.

Mr. Nick Budgen (Wolverhampton, South-West)

Will the hon. Gentleman explain what will happen if this Parliament refuses to give to the Scottish Assembly the powers to which it believes it is entitled? Will the atmosphere of friendliness continue?

Mr. Crawford

If the hon. Member is saying that the House of Commons would reject the will of the majority of people in Scotland, I suggest that he is being rather undemocratic. As an Anglophile who attended an English university, I do not believe that it would do so.

The Chairman

We seem to be travelling down a blind alley. We should not be discussing the general powers of the Assembly. We must stick to the substance of the amendment under debate.

Mr. Crawford

In 1974–75 it was estimated that the total receipts from all tax to the United Kingdom amounted to £18 billion and from Scotland about £2 billion. These figures will have increased with inflation. The £2 billion for Scotland includes the conservative amount of £500 million from direct oil revenues. Incidentally, I am delighted that oil has been found near Dorset. The sooner it is exploited, the better.

Expenditure on supply services was £19 billion for the United Kingdom and £1.8 billion for Scotland. We have been treated to various figures and hon. Members have said that more money per head is spent in Scotland than in England. However, two important sections of public expenditure—defence and external affairs—are calculated on the basis of Scotland's population as a proportion of the United Kingdom population at about 9 per cent. In 1955–56 the Scottish Council discovered that expenditure on defence in Scotland was about 5 per cent. of the total United Kingdom spending, and nil on external affairs.

The cost of devolved services has been estimated at £2.4 billion. If we have universities and full powers over trade and industry, this figure will be more. If the Government do not accept our suggestions or the amendment, it is not good enough for them to say that Scotland is getting real devolution, because she is not.

The Conservatives supported us on Clauses 1, 36 and 40. I was delighted that the Leader of the Opposition said in Glasgow yesterday that she supported devolution, but I am sorry that the Conservative Party has not outlined its policy today on how it would or would not raise revenue. I look forward to a constructive contribution from the Conservative Front Bench tonight.

The people of Scotland are becoming concerned about Conservative statements that we are to spend money on this, that and the other. The Conservatives have said that if they are elected—I doubt that they will be—they will make the road from Perth to Dundee a dual carriageway. They promised to make it a dual carriageway before, but after four years it was still not constructed.

This is not a matter of Westminster giving a concession to the natives of Scotland who have become restless. It will be up to the people of Scotland, and not Westminster, to decide on political, financial and other matters.

Mr. Grieve

The somewhat qualified welcome by the hon. Member for Perth and East Perthshire (Mr. Crawford) of the amendment, which was moved so cogently and persuasively by the hon. Member for Berwick and East Lothian (Mr. Mackintosh), should remind the Committee, if nothing else has, of the dangers of this amendment. My own view is that its effect would be to transform a dangerous sham into a somewhat more dangerous reality. It is a dangerous sham because the Bill is designed to give to the people of Scotland resident in Scotland a semblance of self-government. The amendment would give them at least a limited power over their own finance, and that would be a very important derogation from the powers of the Westminster Parliament. That is why I say that it would transform a dangerous sham into a dangerous reality.

9.30 p.m.

I want to deal for a moment with the reason why I use the word "dangerous". I have always been opposed to this legislation because it seems to me to sow the seeds of future conflict. I doubt whether there is the demand for self-government in Scotland which the Scottish nationalists there and in the House say exists. I believe that what people really resent today is over-government, over-taxation and the weight of bureaucracy.

Devolution is sold, to the extent that it is sold, to the people of Scotland and Wales as a means of escaping that over-government. But in reality it will serve only to increase the weight of government. It will increase the burden and increase the numbers of bureaucrats, and it will create another tier of authority. The last state of those who think that they are having their problems of over-government solved will be worse than the first. It is here at Westminster that we must solve the problems of the day and reduce the burden of government and taxation to which people so greatly object.

I pay tribute to the ingenuity of the hon. Member for Berwick and East Lothian and those who advised him in the way that the amendment is drawn so as to bring it within the rules of order. It would, however, make possible only a theoretical reduction of taxation and government in Scotland. If it were carried to its logical conclusion we might find that people who were working in England were hastening to reside in Scotland because the taxation there was lower. Of course, in reality it would not be lower, because the mere weight of increased bureaucracy would ensure that it was not. Theoretically, it could possibly be lower and that would lead to the ridiculous result—ridiculous in the minds of many Labour Members—of people fleeing England to pay lower taxes in Scotland.

Mr. Fairbairn

I can assure my hon. and learned Friend that it would not be necessary to flee England because under the relevant schedule, in Amendment No. 544 upon which this all depends, the liability to tax is based upon residence in Scotland as reported in the electoral register. Therefore, one could say "I am sorry. For the purposes of this year I am resident where I have my home. For the purposes of next year I shall be resident in Scotland where I also have a home." I have a home there, too, and I am on both electoral registers. I therefore do not have to flee.

Mr. Grieve

My hon. and learned Friend has expressed a very personal point of view. I am sure that very many of us would think that it would be a great advantage in the circumstances to have homes on both sides of the border.

However, the truth is that in the amendment there is a possibility—which makes a nonsense of it—that in England and in Scotland different rates of taxation should or might prevail, so as to enable persons on one side of the border or the other to resolve some of their tax problems by hastening to reside on that side of the border where taxes were lower. That is one of the logical difficulties.

It is not, however, to that difficulty that I pin my objection to the amendment. I pin my objection to it on the ground that it gives teeth to a measure which has in it the potential to break up the United Kingdom. It is to defend the unity of the United Kingdom that I have conceived it to be my duty to take part in these debates on the Bill and the Bill that preceded it.

For those reasons, I oppose the amendment.

Mr. Buchan

The hon. and learned Member for Solihull (Mr. Grieve) has at least put his finger on the problem to which we should be addressing ourselves tonight. I think that we are facing the possible break-up of the United Kingdom. It is a great likelihood. The question is whether the passing of the Bill or the failure to pass the Bill hinders, prevents, or makes more likely such a break.

However, I think that the beginning of wisdom in this matter is to understand that that is the measure of the implications with which we are dealing in the Bill. I have not been convinced that the Government Front Bench have ever taken on board those implications. I have not been convinced that the majority of the Conservative Party has done so. I am convinced that increasing numbers of people in the Labour movement in Scotland are beginning to understand these implications. That is what we are facing.

Therefore, when we look at this question, which I regard as one of the two crucial questions of the whole issue, we look at it from this point of view: does this assist us in the situation in which we have placed ourselves, facing the possible break-up, through accident, of the United Kingdom?

On this point I think that there are two things that are crucial, of which this is one. The first is the question of the referendum. I argued the case for a referendum on a two-question basis—on the ground that the passing of the Bill would solve nothing of the real problem with which we are dealing, but nor would a referendum based on a single question solve anything, because it would not have answered its own question. It would not have decided the question whether we wanted only an Assembly. It would have left the question open for the immediate use of the Assembly to crack into independence. Therefore, it seems essential to engage in the politics of the thing by having thrashed out in Scotland the issue of independence.

I say further that if the Scottish people said "Yes" to independence, I would accept that. I would accept it infinitely more willingly than the prospect we are facing, which is of creating an Assembly without first dealing with the question of an immediate consequence of a move towards independence and then a crackup, accidentally, through acrimony and conflict, into a break-up of the United Kingdom.

Mr. Fairbairn

Will the hon. Gentleman give way?

Mr. Buchan

Not now.

That was one crucial issue. The second crucial issue was the question of responsibility of the Assembly, because without its becoming a responsible Assembly the creation of the situation I am describing becomes infinitely more likely. There would be an irresponsible Assembly—by which I mean financially irresponsible—in which the pressure would be permanently on for more moneys from London and in which the accusation would be made permanently that everything that was not achieved in Scotland was due to the meanness of the Government in London. This cannot be avoided unless we can make the Assembly responsible.

It is easy to see the scenario that we would have. Let us envisage that a new school is wanted in my area, where I was an Assemblyman. At the present time, if I were a councillor or a Member of Parliament, I would have to face up to my responsibilities on the question that no new school has been built. I cannot say that someone else is responsible for financing it. I have to say that my Government are responsible for failing to put in the moneys for the school. I have to defend the position, if necessary, but I cannot dodge the issue.

If I am a local councillor, I cannot dodge the fact that I am responsible for the failure to build the new school, because the local councillor is responsible for the level of rates. The rates and the Treasury are the direct responsibility of the councillor and the Member of Parliament. They cannot avoid this responsibility. But if I am an Assemblyman nothing can be easier for me. It is not the fault of the Assembly that the school has not been built. It is the fault of the Government in London for failing to give a big enough block grant. As an Assemblyman, I would probably lead the campaign, and every other Assemblyman would do the same in his own area.

The demands that will be made in such an Assembly will be and must be insatiable, because there is nothing to stop the demands being made and there is everything to stop them from being satisfied. We shall therefore literally create an irresponsible Assembly.

This has not been an easy period for me as I have seen the errors being made in relation to the Bill and the politics around it. It has been difficult for me to make my decision as to the best thing for me to recommend. I have argued time and time again that all constitutions are flawed. The reason why we can accept a flawed constitution is that there is a general will in the community to accept it and to find a means of working it, despite the flaws. But there are some flaws which of themselves can prevent a constitution from operating. I accept this. I have argued frequently with the right hon. Member for Down, South (Mr. Powell) on this point. In discussion after discussion on the Bill I have tended to follow him, and my main defence has been to say "Yes" to the West Lothian question and to say "Yes" on the question of that central flaw. That position can be tolerated if the will is there to find a method of making the constitution work, with all its imperfections.

I am not sure, however, that this is the case on the question of taxation. I believe that here the flaw is such a massive one that it could crack the Assembly into independence, precisely because it creates a continuous and literally insatiable demand in the Assembly.

My hon. Friend the Member for Edinburgh, Central (Mr. Cook) referred to the comment of my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh) that without tax-raising powers the situation is not tolerable. As my hon. Friend the Member for Edinburgh, Central put it, my hon. Friend the Member for Berwick and East Lothian must face up to the consequences of this situation.

I may also have to face the consequences, having argued the case for the Assembly—and sometimes having been the only Labour Back Bencher to do so—that the clause has a massive flaw. I liken it to my consideration of the absence of the second question in the referendum. I do not know whether I can advise Scottish people to take the risk of going into an Assembly if we do not first settle this question.

It is for this reason that I must support the amendment. It is not that I do not think that it is flawed. Indeed, my hon. Friend the Member for Berwick and East Lothian will accept this. The amendment is there because we do not believe that it is impossible to find a method giving the Assembly tax-raising powers. To the extent that the amendment is inadequate, the Government, if it is passed, will have to take it away and come back with a better one. I believe, however, that without such an amendment we should be creating an enormous danger and an enormous risk for our future.

That is what is being said in the amendment. I am sure that my hon. Friend the Member for Berwick and East Lothian would agree. What is the situation? It is not because we wish to see necessarily a massive fluctuation in taxation.

9.45 p.m.

The argument of the right hon. Member for Down, South was circular, because he referred to the relationship between legislation being revenue-involved and expenditure-involved, one an end point of the other. That is true in any modern democracy. The right hon. Gentleman said the problem was because we would be giving not devolution but only partial devolution. He put forward a thesis of all or none with no medium position. But I believe that the Scottish and Welsh people, like the rest of the United Kingdom, want general parity of conditions throughout Britain.

It would be intolerable to Scottish people if through devolution they were to have a lower level of health benefits, pensions and social security. We therefore say "Yes" to partial devolution. We do not want the kind of devolution that will make one section of our community poorer than another in respect of these services in the same way as Scottish workers will fight for parity with the English in wages, although now in so many cases English workers are fighting for parity with Scottish wages.

What I am saying is that we can have partial devolution with regard to the services largely administered by local government and the aspects of our life where there is a Scottish tradition and a Scottish form of doing it—for example, law and education. It is a very different thing, however, to have the kind of devolution which would be involved in the kind of taxation shift that would make a major difference and so create a tax haven.

The problem we are facing is how we deal with those problems so that the Scottish people cannot be placed in a position of saying The reason why we are being deprived of X is that the London Government is not doing it". I as an Assemblyman, for example, would have to face up to my responsibility and say "Yes, you can have that new school if you are prepared to pay X amount more in taxation". Despite the difficulty we have of discussing variations in the level of taxation, because of the form of the amendment, it is that problem with which we are dealing.

The problem is that any fluctuation and variation will be minute, but it has to be at the point at which we say "If there is anything more you want, we have to finance that extra amount above the general parity".

In Sicily, where there is regional government—but then there is regional government throughout Italy, and that makes it infinitely easier—there is not a polarised situation of one-to-one.

Mr. Mackintosh

It was not always so.

Mr. Buchan

It was not always so. There has been that situation in Sicily since 1947. But if one takes a tour on the Autostrada del Sol from the north of Italy right down to the toe, between Messina and Palermo, one pays to use the autostradas. But one does not pay on the other autostradas in Sicily—for example, from Palermo to Catania. One was built by the Italian Government as part of their national network but the others were built on the initiative of the Sicilian regional government, which had to pay for them by raising extra taxation.

That is the kind of thing which may be open to the people of Scotland. That is what we are talking about. I plead with people to understand that what we are facing here is not the present time or this Bill but rather the creation of future conditions under which the Assembly will not of itself ruin the unity of the United Kingdom. I hope that it will be able to work. I hope that the time will be given to allow it to work and prove itself or otherwise. There are no Medes or Persians in politics.

Therefore, a newly created Assembly must itself have the responsibility of getting those extra things which it believes Scotland desires. If the Assembly is to be responsible, it cannot be continually under the kind of pressures which the SNP would be imposing continuously and correctly because it wants to crack up the United Kingdom and which other irresponsible Members of the Assembly would be forced into following. That is the argument for this amendment, and I plead with the Committee to pass it.

Sir David Renton

The hon. Member for Renfrewshire, West (Mr. Buchan) pointed to the financial dilemma of devolution and asked us to support the amendment, but even the hon. Gentleman does not claim that it will immediately resolve the dilemma. All he is saying is that it may go some way to create conditions in which, at some uncertain time in the future, the dilemma may be resolved. I am sorry to say that, having lived with this subject for some years, I think that this is an insoluble dilemma.

I wonder whether those who enthusiastically support devolution have ever asked themselves whether Scotland will be financially better off under devolution than under a system which has prevailed since the Union, with the House of Commons voting such money as will enable Scotland to keep pegging roughly level with the rest of the United Kingdom. We undertake that job in this House through estimates, through the rate support grant, which we debated before Christmas, and through specific help of one kind and another. We take that action on behalf of United Kingdom taxpayers in general—and I must emphasise that it is the taxpayers of England in particular because that is the greatest source of wealth in the United Kingdom. We undertake that task without complaining. We do it because we know that Scotland needs our help.

The question that arises is whether under any financial arrangements for devolution Scotland will be any better off. The Kilbrandon Commission spent many meetings discussing this very question. One reason why I parted company from the rest of the Kilbrandon Commission and decided that neither executive nor legislative devolution would get us off this book was that I did not think any of our studies or proposals or any solutions that were put before us would enable Scotland to have a better system than the present one to be devised for helping the people of Scotland.

Mr. Robert Hughes

Will the right hon. and learned Gentleman address his mind to the question posed by my hon. Friend the Member for Renfrewshire, West (Mr. Buchan)? We recognise how much more money per head is being made available in Scotland. However, over many years this has never been recognised and even yet in Scotland it has not been recognised. What will be the situation when the Assembly is asked to produce an extra number of schools, houses or social workers, and when the Assembly says "We cannot give you those because the Treasury in England will not provide the money"? How will the unity of the United Kingdom remain as it is unless we provide the Assembly with the power to raise finance, so that it can say to the people in Scotland "If you want a faster rate of progress than you have at present, you will have to pay for it"? That is the question that must be answered.

Sir D. Renton

I am grateful for that intervention because it enables me to make the point that a Scottish Assembly will not be able to raise enough finance—certainly not as much as we now provide. Once the financial integration of the United Kingdom economy is modified in the way the Bill seeks, I do not see the House of Commons voting enough finance to make up what we now provide.

I shall follow up what the hon. Gentleman has said, because it fits in with what I was about to say. Scotland's needs per head are even greater than those of England. This is the result of simple geographical factors of two kinds. First, there is the long haul—the fact that Scotland is one of the most distant countries of Europe. Second, there are the internal geographical reasons. Within Scotland com- munities live longer distances apart than they do in any other part of the United Kingdom. Therefore, in order to provide the same standard of living, the same standard of services, and so on, Scotland's needs are greater than those certainly of England and Wales and, I should have thought, of Northern Ireland, too.

Let us look now at the other side of the account—Scotland's capacity to pay to meet those greater needs. Alas, Scotland's capacity to pay is less. Her resources are smaller. She was the pioneer of the Industrial Revolution, but by 1914 Scotland had worked herself out of all the easily accessible coking coal, so vital for steel production and other things, and had worked herself out of all her native iron ore. Her heavy industries—coal, steel and shipbuilding—have declined. All of these would have helped the national output per head in Scotland to be of the kind necessary to meet Scotland's greater needs.

With Scotland's greater needs and at the same time smaller resources, what do we find is the outcome? In our first debate today, the hon. Member for West Lothian (Mr. Dalyell) produced one interesting set of figures, and my right hon. Friend the Member for Crosby (Mr. Page) produced another. I have been doing a little simple arithmetic since those two speeches were made. What it comes to is this. Public expenditure per head in Scotland in 1975–76, the last year for which figures are available, was 22 per cent. higher than public expenditure per head in England, while, on the other hand—I hope that the hon. Member for Aberdeen, North (Mr. Hughes) will pay attention to this—Scottish taxes in the latest year for which figures are available—the figures were given by my right hon. Friend the Member for Crosby—produced 11 per cent. less per head than did taxes in England.

Here lies the dilemma which a devolved Scottish Government and legislature would have to face—that Scotland needs more and can find less.

Dr. M. S. Miller

rose—

Sir D. Renton

I ask the hon. Gentleman to allow me to pursue the matter for a moment, since I am trying to present an ordered argument to the Committee. I shall give way a little later.

For the reason which I have given, we in the House of Commons, year after year, have to vote proportionately more per head for Scotland than for England—millions of pounds' worth. We do it with only small complaint and, as hon. Members may have understood from yesterday's debate on the Public Accounts Committee, with only the minimum amount of control.

Dr. M. S. Miller

I am much obliged to the right hon. and learned Gentleman for giving way. I agree wholeheartedly with the analysis which he has made, which gives an excellent outline of the present Scottish difficulty. But he has left out oil. I do not believe that Scotland has any right to make the claims which she makes in respect of oil, but, if there were a completely separate Scotland, in all equity the rest of the United Kingdom would have to make available to Scotland the oil which is off her shores. There would have to be an agreement.

Does not the right hon. and learned Gentleman accept that there is a possibility that Scotland could use that oil in order to re-equip her industries and revitalise her economy in order to get on a par with the rest of the United Kingdom? He has left out that bit of the argument, and I should like to hear his views about it since that would complete his otherwise entirely accurate picture.

10 p.m.

Sir D. Renton

This will add to my speech in a way that I had not intended, but I am happy to do so.

Let there be no muddled thinking about the oil. The revenues from it will be needed partly to repay the enormous debts incurred for the rest of the world in recent years. That is the first call upon the oil revenues, and it is a United Kingdom call upon them.

Secondly, when we are thinking of the oil, we must think not only of the location of the oil, some of it in the same latitude as Scotland; we should also think of where the capital and the risk taking, not only in money but in lives, has come. That capital and risk taking has not all come from Scotland.

Mr. Fairbairn

Very little.

Sir D. Renton

My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn), who represents a Scottish constituency, says "Very little". He may be right, and we should bear that in mind.

But there is some consolation. Some of the oil terminals for oil which is within the Scottish latitude are already bringing large quantities of revenue to the Aberdeenshire coast. I remember a former hon. Member saying to me that when he was a Member his constituents were poor but happy and now they are rich and "as miserable as hell". They are getting some money from the work created at the terminals and through manning the offshore stations. But to say that this is to be the solution of what I have described as the Scottish financial dilemma would be not only fallacious for the reason that I have given but also short-sighted, because it is an accepted fact that the oil may last only 30 years, and that is a shorter time than I have been in the House. Let us by all means bear oil in mind, but do not let the misguided, charming people who represent the Scottish National Party run away with the idea that that will solve the Scottish financial dilemma.

However, the more relevant question is whether the amendment moved by the hon. Member for Berwick and East Lothian (Mr. Mackintosh) will do it. The right hon. Member for Down, South (Mr. Powell) described the amendment as "a valiant effort But I do not think that it will do it. I think that the hon. Member for Berwick and East Lothian has created a fiscal and administrative nightmare with the amendment.

Let me deal with it seriatim. First, there is the personal income tax. Presumably that excludes companies' income tax. But the personal income tax levied upon Scottish residents is to go to a Scottish Executive. However, we find that the Scottish Assembly may reduce the rates at which this income tax is levied but that it must not increase them. The object of the exercise presumably is to turn Scotland into a tax haven.

Mr. Mackintosh

I am surprised that the right hon. and learned Gentleman raises this point. Was he not here when it was discovered that the word "increase" had to be removed to bring the amendment within the rules of order? Originally, it was "increase or decrease". This is the object of the exercise. But the Chair kindly pointed out that "increase" was out of order. The object is to allow the Scottish Assembly to vary it within certain areas. I thought that the right hon. and learned Gentleman realised that.

Sir D. Renton

I am grateful to the hon. Member for Berwick and East Lothian. I was present for most of the discussion on the amendment. It may be that my attention was momentarily distracted, possibly by myself.

So we should read "vary" for "reduce". Let us say that the Scottish Assembly varies the rates. Very well. If it reduces them, it turns Scotland into a tax haven for English taxpayers, and there will be a great influx from across the border. Splendid. But if the Assembly finds that it does not get enough money to meet the greatly increased Scottish needs, the position is the other way round. Then England becomes a tax haven, for the first time in history. I wonder whether the hon. Gentleman really thinks that that would go towards a solution of the financial dilemma for Scotland. I doubt it.

Let us take the proceeds of the assigned excise taxes levied in Scotland—on tobacco, alcohol, betting and gaming, and hydrocarbon oils. When a Scotsman drinks a bottle of whisky, not the whole of the tax on it will go to the Scottish Assembly, only half. If that is to pay for the extra cost of separate administration, it seems to me to be a very large chunk of the tax on a bottle of whisky to allocate for such a purpose. If the hon. Gentleman will turn to one of the appendices to the Kilbrandon Report, he will find that those of my colleagues, with all of whom I disagreed on these matters, who did go seriously into the question of which taxes could be allocated for Scottish purposes did not go for 50 per cent.—they went for the whole bottle. I should be interested to know why the hon. Gentleman has gone for only 50 per cent. I should have thought that he would go for at least 90 per cent., allowing a generous proportion of 10 per cent., perhaps two double Scotches, for administrative purposes.

Mr. Mackintosh

The object was to raise enough money to cover the equivalent of the block grant. The other moneys would pay for what were referred to in the Government of Ireland Act as imperial purposes—defence, foreign affairs, and so on. It was an attempt to raise enough money without personal income tax to raise the equivalent of a block grant which would then be disposable by the Assembly.

Sir D. Renton

Noble sentiments indeed, but that does not display any confidence in the financial excellence and success of the Scottish Executive, because we read on that if the receipts of personal income tax and the half share of the assigned excise taxes are not enough, there is to be an equalisation payment from the Treasury. So we are back to square one—a block grant. The only difference is that, instead of there being a once-and-for-all annual effort, working out exactly how much Scotland needs for its services, there is to be this very complicated series of calculations, in the course of which there will be an estimate of the Scottish proportion of public expenditure, including the very matters that the hon. Gentleman has mentioned—defence, foreign affairs, and, no doubt, overseas aid and all kinds of other things. In this connection, I ask him whether we are to assume that there is to be some form of continuation of rate support grant to local authorities in Scotland. The hon. Member for Berwick and East Lothian nods. Well, that is that one.

We know that there are to be further rates for local authorities to raise. We know that the Scottish Office will continue to lay Estimates before the House in respect of non-devolved matters affecting Scotland. The hon. Member has not moved other amendments to the Bill which would deal with the question of what is to happen to the block grant, which remains in the Bill. There would be an overlapping of his proposals with those of the Government.

It seems that, instead of the smooth-working, felicitous way in which we vote hundreds of millions of pounds for the benefit of Scotland from the general body of taxpayers of the United Kingdom—instead of these excellent arrangements which have served Scotland so generously and effectively—we are to have awful wrangles in the House of Commons which we do not now have. We shall have conflict, which is minimised at the moment.

I am sorry to say that the worm might turn and we may find that there is an attitude of some parsimony on the part of English Members and English taxpayers which, in their generosity they do not display under the present system. For these reasons, I hope that the valiant efforts of the hon. Member for Berwick and East Lothian will not be supported by the Committee. I hope, too, that the Government will bear in mind the things said in this debate and in the earlier one and take the Bill away, realising that from the financial point of view, which matters to the Scots, devolution will be a disaster.

Mr. Dalyell

On a point of order, Mr. Godman Irvine. Perhaps I am the last person to make any complaint—and I am not complaining—but I think the Com- mittee should realise that we are in something of a situation. In roughly 40 minutes' time the guillotine will fall on clauses up to Clause 60. There are many vital matters which will be undiscussed. My hon. Friend the Minister of State will say that this is the responsibility of the House of Commons, and I am not blaming the Government for this, because, perhaps, all of us have some responsibility. My point is simple. In these unique circumstances could there not be a discussion through the usual channels to see how the problem may be alleviated?

The Second Deputy Chairman (Mr. Bryant Godman Irvine)

No doubt the hon. Member's observations have been heard by the usual channels, who will take such steps as they feel desirable.

Dr. Bray

This is one of the most important subjects with which we have had to deal on this Bill. The Committee has spent considerably longer on less important matters. There are three elements in the amendment which, I agree with my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh), are essential to the proper working of the Assembly. I hope that the amendment will be passed so as to give the Government the opportunity to table their considered views on how best to tackle the objectives, given the will of the Committee in this matter.

I am sure that my hon. Friend the Member for Berwick and East Lothian would agree that there are difficulties about some aspects of his proposals. For example, if the nominal imputed income from these taxes rises or falls above or below the 90 per cent. of imputed expenditure, the Assembly could suddenly become or cease to become eligible for equalisation grants. These are matters of detail—

Mr. Gerry Fowler

Does not my hon. Friend realise that that type of weakness is built into any system which seeks to have equalisation on the basis of need and that there is no escape from it? That is one of the fundamental weaknesses of trying to have some revenue powers for the Assembly, which have foxed Ministers for a long time.

10.15 p.m.

Dr. Bray

There are difficulties in any equalisation formula. I agree that it is a problem that must be dealt with.

There are three broad areas of consideration which have led to arguments for and against taxation powers for the Assembly. There are economic, administrative and political arguments. The economic arguments have been mistaken by those who argue that it is essential to maintain the central management of the United Kingdom economy. That is an important argument, but it is like arguing that because one wants to keep a motor car in one piece one must bolt the wheel axles on to the chassis. The one sure thing is that, if one does that, the car will shake itself to bits. If one says "But car suspensions are awkward, expensive things to design", then, alas, that is so, but some flexibility in the economic relationships between the different parts of the United Kingdom is an essential part of maintaining the economic integrity of the United Kingdom.

Let us take, for example, the firemen's dispute. How will such a dispute be handled when there is a Scottish Assembly? Under the Bill as it stands, it would be open to the Assembly to settle with the Firemen. Given the political pressures, given that we have very little of the present financial year to run, and given the political problems that there might be in Scotland, it is not inconceivable that the Assembly would settle with the firemen for a substantial increase, with the expectation that that settlement would automatically spread to the rest of the United Kingdom and would not be met by a reduction in the pay of other public service workers in Scotland.

Mr. Fairbairn

How would Clause 40 affect that argument?

Dr. Bray

It was defeated by the hon. and learned Gentleman and his hon. Friends.

To meet the problem of the rigidity of public sector pay negotiations, the Government wished to exclude such negotiations from the powers of the Assembly in their previous Bill, giving the Secretary of State a veto. That has been removed from the Bill. The Committee has defeated the statutory application of incomes policy to Scotland in the Bill. Now we face the situation whereby almost automatically the Assembly will be able to dictate the incomes policy of the United Kingdom.

The only way in which the Government can protect themselves against that perhaps automatic inflationary pressure from public sector pay claims in Scotland is to have a system by which the payment of those public sector wages can be kept within Scotland. For better or worse, and however the Assembly cares to juggle it, that can only be by tax powers. If it is left to adjustments in other parts of public sector pay, the political pressures will inevitably be too hard to contain within Scotland and they will burst out into the rest of the United Kingdom.

Mr. George Cunningham (Islington, South and Finsbury)

But how would the amendment achieve the end that my hon. Friend seeks? My hon. Friend was saying that if firemen were paid more in Scotland there would be a likelihood that a higher settlement would be agreed in England. Surely that is just as likely to happen if the amendment is passed as if it is not. The Scottish Assembly would prefer that the English firemen should be paid more, so that the relationship between the expenditure on the two sides of the border should remain the same. England might say that the cost of that increase in Scotland should be borne on extra Scottish taxation. But the realities of politics would surely dictate that in many circumstances English firemen's wages were settled at the same high level as they had been led to by a Scottish settlement.

Dr. Bray

The argument is very difficult, whether the increase is met by the reduction of other public servants' pay in Scotland, which is what the Government are relying on at present, or by increased taxation in Scotland. That is still difficult, but perhaps slightly less difficult than reducing the pay of, say, primary school teachers in Scotland.

That is the quandary to which the Government are now subjecting the Assembly. It is an unrealistic political quandary into which to put the Assembly. My belief is that the inevitable result will be that Westminster will be forced into giving the Assembly tax powers simply to contain the political and economic pressures within Scotland.

On the administrative front, we are told that it will cost another £2,000 million to have a different rate of income tax in Scotland. That is on the assumption that the present income tax system will survive. Like other hon. Members who have spoken, I doubt whether it will. The Inland Revenue had a proposal for computerisation of PAYE in the late 1960s. It was a plan involving the creation of a number of computer centres throughout the United Kingdom, each employing 5,000 tax officers. It was not to be fully implemented before 1985. At that time I was a Minister, and I pointed out that this was a totally unrealistic tax plan and that administration and methods would change so much that it would not get beyond 1970 before it collapsed. That, in fact, occurred. The system was abandoned by the Conservative Government after they came to office in 1970.

We shall get enormous changes in the tax system. I believe that self-assessment is a strong contender and that some form of negative income tax is likely to be introduced. In the changed pattern of income tax, there is bound to be the important consideration that its administration should be simplified and adapted to the completely different pattern of clerical procedures that are part of the expansion of computerisation by employers and by Government Departments. The basic restructuring of the system will come under pressure from the impending breakdown of the present system. The Inland Revenue will not admit that the system is breaking down. We just get longer and longer delays. But sooner or later changes will have to be made.

It is arguable that we should seek to precipitate this process by saying that for political reasons the Scottish Assembly must have different tax powers. If we do this for the Assembly, we should also do it for the highest level of local authorities in England and for whatever is appropriate in Wales. If we change the basis of income taxation in England and the basis of taxation for the Scottish Assembly, the difficulties will be removed.

We cannot put that provision into the Bill because we are stuck with the present income tax system for the time being. However, I hope that we will vote for the amendment as a warning flag to the Government that the matter must be dealt with urgently.

We could give the Assembly powers to vary the rates of a number of taxes and leave it to the Assembly to propose the means by which it could do so. That puts the Assembly into the position of feeling the political pressures—I instance the current case of the firemen's claim, but there will be many other equally urgent claims upon the Assembly. Under these political pressures and responsibilities, the Assembly must propose administrative means for fulfilling its objectives. Let it open negotiations with the Government at Westminster and discussions with the House of Commons to arrive at a pattern of taxation that is better for the United Kingdom as a whole.

Mr. Gerry Fowler

Does my hon. Friend realise that what he has just suggested is infinitely simpler than what is suggested in the amendment? The objective could be achieved for the Scottish Assembly if it were given power to vary the rate of certain taxes with the loss to the Revenue being deducted from the block grant or the profits being added to the block grant. This could still be subjected to endless objections. Never-the less, it is simpler than what is proposed in the amendment.

Dr. Bray

I agree entirely but the point here is the principle. If we do not vote for the amendment in principle, there will be no other opportunity in the Bill to indicate the wish of the House to have tax powers for the Scottish Assembly. The question for the House is not whether we have a Scottish Assembly but whether, if we have such an Assembly, it should have tax powers. That is the simple principle that we are debating.

Mr. Dalyell

is my hon. Friend suggesting a situation in which taxes could be varied so that hon. Members would have to go to their constituents and say that for the sake of this great devolution scheme their petrol will be taxed higher than that in England and they will have to pay more for their whisky? We should be subjected to the most appalling ribald comment.

Dr. Bray

The pattern of expenditure and taxation in Scotland will adjust in different ways from the pattern in England. I argue that the pattern is likely to change even between different parts of England and Wales. I know that my hon. Friend is a good regionalist and would prefer regional devolution within Scotland as well as within England, and I cannot understand why he does not treat the Assembly as a pioneering development of that wider devolution which he quite properly seeks.

For the sake of containing the economic unity, a viable tax administration and a political future for the unity of the United Kingdom, I hope that the amendment will be carried.

Mr. Charles Morrison (Devizes)

We are not debating the establishment of a federal system. If we were, we would be involved with a written constitution which would act as a cushion between the two sides of the argument—the federal Parliament and the Parliament of the various States involved. A written constitution would provide neutral ground.

The Bill is doomed to failure since the concept of devolution that we are debating is likely to lead to chaos or disaster because of the arguments which will arise from such an act. We are debating a concept which, as far as I know, has never existed before. It is all the more important, therefore, to try to provide means whereby there will be the minimum amount of argument between this Parliament and the Scottish Assembly.

Probably the most contentious arguments between this Parliament and the Assembly will be over the financing of matters devolved to the Assembly. The only hope of reducing those arguments is to provide the Assembly with power to raise finance itself. That would achieve the objective of the amendment of forcing responsibility upon the Assembly. If it does not have that power, it will act irresponsibly. A cushion is needed, and that can be provided only by forcing responsibility on the Assembly through giving it the power to raise finance.

Secondly, there is the important point that he who pays the piper calls the tune. I do not believe that the Scottish people will accept that the Assembly, without the power to raise finance, will have the control over the course of events in Scotland that presumably they will wish it to have.

10.30 p.m.

For example, if the Scottish Assembly were to decide to introduce a system of education—whether primary or secondary does not matter—different from that in England and such a system required considerable extra capital resources to finance it, the English Parliament and Government would be faced with a dilemma. The Scottish Assembly would, in effect, come to the Westminster Government and say "We have proposed this excellent new system of education, but it will cost a lot of extra money. May we have that extra money in our block grant?"

It might be that the Westminster Government would say "Yes", but it seems more likely that they would say "No", for one of two reasons: first, because they would not have the money—that would be the most likely reason—or, secondly, because they disagreed with the proposed system of education to be introduced in Scotland. Either way, the Scottish Assembly would be likely to suggest that, over what should be a devolved matter, the Westminster Parliament was still exercising indirect control. Therefore, if there is to be any hope for the smooth introduction of a devolved system, it is important that the Assembly should have the power to raise finance.

Finally, I should like to refer to the power of local authorities to raise money by the rating system. I am opposed to the rating system in the sense that it is an inefficient form of raising money for local government. Its inefficiency is proved by the fact that over 50 per cent. of local government expenditure is now provided by the block grant from Westminster. Whilst it is easy to say that, it is not so easy to suggest an alternative, for one simple reason. The local authority unit, be it in England or in Scotland, is so small that any other means whereby it could raise finance would considerably increase the overhead administrative costs. But that point would not hold good if a system of raising finance were to be introduced in an area the size of Scotland, Wales, England or—I do not like to think of such a possibility—the regions in England.

I do not suggest that the proposal outlined in the amendment is perfect, but I believe that it is within the bounds of possibility to introduce a system of raising finance within an area the size of Scotland which would enable the Scottish Assembly to act responsibly. I do not believe that it will be able to act responsibly if the Bill is passed as drafted.

Mr. Teddy Taylor

First, one must point out the impossible position that we are in because of the guillotine. We have spent almost the whole day discussing an unstarred, amended amendment, and the result is that we have had only one day to discuss the crucial question of financing the Assembly. We shall not be able to discuss 17 of the 18 clauses. We shall not have a discussion on the Question "That the clause stand part of the Bill", nor shall we look at the schedule. This is intolerable since this is an important part of the Bill.

The Minister may say that we have only ourselves to blame for this situation because we have talked for so long, but every speech has been constructive. There has not been a filibuster. Admittedly, hon. Members have been confused about a confusing subject, but they have raised matters which worry them. The debate has been notable for the real unhappiness that hon. Members on all sides feel about the Bill.

One of the views expressed was that of the hon. Member for Berwick and East Lothian (Mr. Mackintosh), who said that the financing of the Assembly was unsatisfactory. He said that it will not work, it does not make sense and, therefore, we must try some other form of revenue raising. Other hon. Members say that there must be an alternative form of revenue raising that must work, but they do not know what it is.

All hon. Members who spoke in favour of the amendment said "We do not like the amendment. We do not think that it makes sense. We do not think that it will work. It is costly and bureaucratic, but we shall vote for it because we must find a form of alternative revenue raising."

Mr. Fairbairn

There is another alternative which might commend itself to my hon. Friend the Member for Glasgow, Cathcart (Mr. Taylor) and to the Committee. Why could not the Assembly have no grant and why not leave the responsibility of raising the whole of the revenue with Chancellor Crawford of Edinburgh, and then let the Scottish people vote in the referendum?

Mr. Taylor

That is the logic to which one is drawn. There is a case for going a long way, there is a case for going not very far at all, but there is precious little argument for this half-way house.

What are the options? The hon. Member for Berwick and East Lothian said that the present proposals for financing the Assembly are wrong and that they will create confusion and frustration because we are creating an Assembly with powers. But we are giving it the powers of a hospital board. It will be able to spend money allocated to it by Westminster but not to raise money, and this will create conflict. Despite all the wise words about how the system will work, the Leader of the House, who represents a Welsh constituency, must be aware that the same applies to Wales.

In the last 18 months, because of the serious economic situation, local authorities have been forced to cut down on home helps, to close residential homes and to increase local authority rates. Does the hon. Member for Berwick and East Lothian honestly envisage that if we had this type of Assembly Westminster would say "You must cut down on everything because we are short of money"? Does he imagine that the Assembly would then say that it would voluntarily cut down the number of home helps, close residential homes and do all the other nasty things? Inevitably this would be a recipe for conflict. It certainly would have been last year, and it will be in future years.

There is another reason why the proposals in the Bill are unacceptable. If there is a block grant, it will be an annual occasion for identifying the extra which Scotland gets as a result of its needs. At present, because of special problems concerned with remoteness, unemployment and so on, Scotland gets a lot more than its share on the basis of population from the United Kingdom Treasury. There has been much comment about the amounts involved. The hon. Member for Perth and East Perthshire (Mr. Crawford) said that we should leave out of consideration the question of defence. If, however, we restrict ourselves only to devolved subjects, we find, from reading Hansard of 2nd December last, that Scotland gets £360 per head of the population, Wales gets £320 and England gets £280. On devolved subjects, therefore, Scotland gets 25 to 30 per cent. more, not as a bonus but because of its special problems.

But will it be quite so easy if every year we present to the House of Commons a set of figures for the block grant which require hon. Members such as the hon. Member for Liverpool, Walton (Mr. Heffer), whose constituency has a high level of unemployment, to agree to Scotland getting 25 or 30 per cent. more? We shall face the kind of problems which we have hitherto avoided.

Another reason why the system will not work is that there could be a form of indirect taxation whereby the Assembly, wanting more money and unable to get it from Westminster, would give less to the local authorities, which in turn would have to impose sky-high rates to make up the difference.

There is broad agreement in Scotland that the Government's proposals will not work, but what do we do? Those who support the amendment say that there must be some form of revenue-raising power. This is not a new problem. The Government have studied it, and in that context I hope that hon. Members who have taken an interest in the matter will sttudy the White Paper "Devolution: Financing the Devolved Services". The Government have been through all this. They have concluded that to have a separate rate of income tax as proposed by the hon. Member for Berwick and East Lothian would involve enormous cost. Twenty per cent. of the yield would be taken up by administration. There will be enormous problems on the question of residence. The hon. Member proposes solutions, and I shall come to them, but there is no doubt that this will be a major problem.

It might be suggested that Scotland should raise all its own taxes. But with only partial devolution, and with Scotland being only a part of the United Kingdom, that would not work. There is also the difficulty of having separate rates of tax in a highly integrated economy.

The hon. Member for Berwick and East Lothian has argued for a half-way house which, he must accept, is complete nonsense. He is suggesting not tax-raising powers but a complex, costly and "phoney" accountancy exercise. He is suggesting a block grant written up in a different way, a block grant with a mink coat which will cost about £7 million in administration. He suggests taking some of the income tax proceeds from Scotland and adding to them the proceeds from duty on drink and gambling. He then suggests considering what Scotland would have got under the block grant on the basis of the same percentage of expenditure as we get now. If there were a difference, an equalisation payment would be made, and the hon. Member allows for a variation of 10 per cent.

This all reminds me of what we used to do when I worked in the Clyde shipyards when we calculated the apprentices' piecework rate. We used to calculate how many feet of welding had been done, add an award bonus, even though the award had been phased out, and then add the differentials, and if the result was different from 3s. 7½d. an hour we used to add to or subtract from the amount to make it 3s. 7½d. an hour. This involved a great deal of work. It gave me a job. But, frankly, what the hon. Member for Berwick and East Lothian is proposing is exactly the same thing. He is not employing me in the shipyards, but he wants to employ 2,000 extra civil servants and spend £7 million in doing so.

10.45 p.m.

Mr. Mackintosh

Will the hon. Gentleman realise that, apart from his interesting personal experiences, this method of allocating the product of certain taxes between a devolved Government and the central Government is the procedure employed by the United States, Canada, Australia and Germany, and that they all do it because it gives the devolved Government a share of revenue which is not subject to the whim of the national legislature and is not subject to all the defects of demands for accountability by the people who then would give it, which would be the central Parliament?

Mr. Taylor

Being a professor, the hon. Gentleman should at least read the amendment. He talks about an assured income. What he says is that the assured income is a percentage of United Kingdom expenditure. If the Government decided to spend more money on defence, as we were glad to hear the other day, Scotland would get more. On the other hand, if we had to pay more in Common Market contributions, Scotland would get less. If this is accepted on the basis of a percentage of United Kingdom expenditure, there is no guarantee at all. What the hon. Gentleman is suggesting is not revenue raising.

Mr. Crawford

Will the hon. Gentleman give way?

Mr. Taylor

Certainly not. If the hon. Gentleman would reply to my letters, I might give way to him. I have sent him three letters, to which he has never replied. When he replies to my letters, I shall give way to him.

We must remember that, first of all, the proposal in the amendment is not revenue raising. Secondly, it would be costly and bureaucratic, with the extra 2,000 civil servants. Also, it is not merely the cost in civil servants. What the hon. Member for Berwick and East Lothian must accept is that, according to the White Paper and all the Government's common sense, not only would the Government spend an extra £7 million but industry, commerce and employers would have to spend the same. The hon. Gentleman shakes his head, but he must be aware—this is in the White Paper and it is common sense—that much of the cost of raising taxes now is borne not by the Government but by industry, which does the job of tax collecting for the Government. There would be much extra cost if we had to decide whether an individual lived in Scotland or in England.

The hon. Gentleman suggested that we should allocate the separate Scottish and English income tax, if there is a difference, not on the basis of residence but according to which electoral roll contains an individual's name. How does one get on to an electoral roll? One has to reside at a certain place on a certain day. Frankly, if there were differences between Scottish and English income tax, I believe that we should have the nonsense of people moving to Gretna Green or Carlisle on the day of registration.

What is proposed is a complex scheme. It is a facade of separate tax raising, which is not separate tax raising at all. Those who support the principle of the amendment have said "We know that this scheme is rubbish but we must have something. We cannot have an Assembly with no tax-raising powers."

The very valuable point made by my right hon. and learned Friend the Member for Huntingdonshire (Sir D. Renton) was that there may not be an answer—this is the matter to which we have to turn our minds—whereby we can, with partial devolution to part of the United Kingdom, have separate tax-raising powers.

Unless all those who are contemplating supporting the amendment are confident that they have the answer to this enigma—for which the Government have looked for a long time but have been unable to find, after even considering separate taxation of beds in Scotland—before they support the amendment, which I have no mind to do, they should consider whether they believe that there is an answer to this enigma. They should consider whether it is not simply a case that as we continue discussing the Bill we come more and more to the conclusion that what the Government are proposing is a recipe for conflict and disaster and a recipe for more government and worse government.

Mr. John Smith

We have had a very wide-ranging debate and covered many topics, perhaps the most fascinating of which was the history given by the hon. Member for Glasgow, Cathcart (Mr. Taylor) of his activities in the shipbuilding industry—probably the most useful period of his life. But we have tackled some of the fundamental problems involved in the taxation arrangements and the expenditure arrangements for the Scottish Assembly.

I want to make some criticisms of the Amendment moved by my hon. Friend the Member for Berwick and East Lothian (Mr. Mackintosh). I do not want to make carping or legalistic criticisms of it, although there are many that could possibly be made. I want to go to the heart of the question.

A number of hon. Members have said that they would like to see some form of revenue-raising powers. Nearly all of them have said, as did the hon. Member for Cathcart, that they do not agree with the proposals put forward by my hon. Friend.

I intervened earlier to try to give some figures to assist my hon. Friend's argument so that it would be more clearly understood by the Committee. If the Committee were to adopt the amendment, the proceeds from personal income tax would amount to just under £1,300 million. The amount that would come from the assigned taxes—50 per cent.—would be about £266 million, and there would have to be an equalisation factor of about £330 million. The £266 million is a very notional figure, and it would be extremely difficult in practical terms to assign excise duties as they arose, because the way in which they arise at the point of collection is rather haphazard. A large amount would be collected on whisky in Scotland. The figure I have given is based on the family income survey: it is very artificial. It would be impractical to allocate the assigned excise duties on the basis that they were levied in Scotland.

How much further on are we in replacing a block grant by assigned revenues? When I pointed out the figures, my hon. Friend said that if 50 per cent. was wrong he would make it 60 per cent., but the Assembly does not have power to vary that at all. It would perhaps have to be put into the Bill. What my hon. Friend is trying to do is by one means or another to add up the amount that the block grant would arrive at and then give a marginal variation. I do not see very much difference between having the block grant covering the area of the assigned taxes and having a separate heading called assigned taxes. The real point of the amendment is that there ought to be—[HON. MEMBERS: "Turn round so that we can hear."]. It makes no difference in regard to responsibility, because it would be a notional allocation of resources to the Scottish Assembly. But the main point which I think my hon. Friend is seeking to make is that there ought to be the power to vary personal income tax.

The hon. Member for Cathcart said that the Government have looked carefully at this. Indeed we have, and the White Paper dealing with finance and devolved services is a long catalogue of the whole series of propositions and possible taxes that were considered very carefully in an attempt to find an answer to one of the difficulties about having a variation in the personal income tax rate. We looked at it from the point of view of a supplement rather than a substitute. Philosophically it is much the same thing. The Scottish Assembly might, for example, add on 2p.

The major difficulty is the way in which income tax is collected in this country, as was pointed out in the debate. Under the PAYE system it is extremely difficult to have this regional or national variation without very high cost. The cost to which my hon. Friend referred was obtained by him from the Financial Secretary to the Treasury when he put a Question to him about the cost of levying income tax on people employed in Scotland, not resident in Scotland. He received the answer that there was a staff of 2,000 costing approximately £7 million.

As the hon. Member for Inverness (Mr. Johnston) indicated, the cost on the basis of residence would be £8 million. On a slightly different basis it could be £10 million. Taking it, however, on the basis of £8 million, we have to add, as the hon. Member for Cathcart rightly said, another £8 million for the employers, because the Inland Revenue calculates that for every pound that it costs to raise tax by PAYE—and because we place burdens on employers in collecting taxes—there would be another pound to add to that, so that the cost of this variation would be £16 million.

My hon. Friend asks "What does that matter?" Since under the terms of job creation we could create 2,000 jobs, or whatever it would be, at a cost of £16 million. It is not as simple as that. One has to work out whether it is possible to have this marginal capacity to raise a few extra millions. I do not think that it would be politically possible for the Assembly to have a variation of 20p, which is what the amendment amounts to. That is taking a view which is beyond the realms of political reality. We must have a narrower band than that.

If we had an extra 2p or 3p, the extra amount collected would be a small proportion of the block grant figure of £1,800 million which is likely to arise under the block grant.

Mr. Grieve

On a point of order, Mr. Godman Irvine. Would the Minister mind addressing himself to the Committee and not only to the Benches behind him?

Mr. Smith

I shall endeavour to do that. But the hon. and learned Gentleman must understand that I am trying to answer points which came from behind me. I hope that he will acquit me of discourtesy in not addressing him.

Many hon. Members have said that we should have a system of revenue raising. No one has yet come forward with a system of revenue raising which is economical and practical. My hon. Friend the Member for Berwick and East Lothian has not put it forward in the amendment. I do not think that any other hon. Member who has contributed to the debate has put forward a system of revenue raising that is reasonably economical.

Of course, hon. Members may say that there may be changes in our system of collecting taxes and that we might move away from the PAYE system towards a system of self-assessment, although that has other problems which countries which operate that system would confirm. However, we must deal with the existing taxation system in this country. I do not think that it would be right to put into the Bill general powers of taxation raising without knowing what the consequences would be—for example, the cost of collection and the implications for both the Assembly and the United Kingdom.

We believe that the best way to deal with this is on the basis of the block grant. If our system of taxation changed and if some of the difficulties were removed, no doubt the matter could be looked at again. I stress that a great deal of the costs arise because we operate the system of tax collection that we do.

In the discussions that we have had about the whole system of finance since the Scotland and Wales Bill, particularly in discussions with the Liberal Party, other suggestions were put forward. One in particular, which was interesting, was that instead of having an annual discussion with the Assembly we ought to have it over four years and perhaps fix a percentage whereby the Assembly might have, say, 11.2 per cent. or 10.8 per cent. of the total money spent on similar services in England.

That might form a basis upon which we could deal with the finances of the Assembly on other than an annual basis. That proposal came forward from the Liberal Party and I pay tribute to its members for having put forward the idea. It is one which the Government favour. We think that it has a great deal of merit in it. We believe, however, that it has to be discussed fully by the Scottish Assembly. It is a proposal which the Government will put to the Assembly once it is established.

We also believe that to try to objectify the basis on which the negotiations would be considered would also be a useful element in assessing this. Basically, however, the allocation of finance within the United Kingdom must be on the basis of need. That is recognised by my hon. Friend the Member for Berwick and East Lothian in the fact that he has placed an equalisation formula within his proposal. He referred to the systems of other countries. It is quite true of Australia and Canada. I draw attention to the situation in West Germany, where there is little in the way of independent tax-raising elements. They are allocated shares, and so much is allocated to different taxes. But there is little that the Länder Governments can do by cutting public services to reduce the burden of taxation. Taxation rates are fixed at the federal level. It is an interesting but the least understood feature of the German system. It is difficult to compare this situation with a different one. This is the

first exercise in an ongoing Government decentralisation of power to a new—

It being Eleven o'clock, The CHAIRMAN proceeded, pursuant to the Order [16th November] and the Resolution [22nd November], to put forthwith the Question already proposed from the Chair.

Question put, That the amendment be made:—

The Committee divided: Ayes 61, Noes 306.

Division No. 52]	AYES	[11.00 p.m.
Adley, Robert	Grimond, Rt Hon J.	Scott, Nicholas
Bain, Mrs Margaret	Henderson, Douglas	Smith, Cyril (Rochdale)
Beith, A. J.	Hicks, Robert	Smith, Timothy John (Ashfield)
Bray, Dr Jeremy	Hooson, Emlyn	Steel, Rt Hon David
Brotherton, Michael	Howells, Geraint (Cardigan)	Stewart, Rt Hon Donald
Buchan, Norman	Hughes, Robert (Aberdeen N)	Stewart, Ian (Hitchin)
Buchanan-Smith, Alick	Hughes, Roy (Newport)	Thomas, Dafydd (Merioneth)
Buck, Anthony	Kerr, Russell	Thompson, George
Canavan, Dennis	Knox, David	Thorne, Stan (Preston South)
Carmichael, Neil	Lambie, David	Wainwright, Richard (Colne V)
Cook, Robin F. (Edin C)	Lamond, James	Walder, David (Clitheroe)
Cormack, Patrick	Lewis, Kenneth (Rutland)	Watt, Hamish
Craig, Rt Hon W. (Belfast E)	MacCormick, Iain	Wells, John
Craigen, Jim (Maryhill)	MacFarquhar, Roderick	Whitehead, Phillip
Crawford, Douglas	Marshall, Michael (Arundel)	Wigley, Dafydd
Crouch, David	Miller, Dr M. S. (E Kilbride)	Wilson, Gordon (Dundee E)
Douglas-Mann, Bruce	Morrison, Charles (Devizes)	Wise, Mrs Audrey
Ellis, Tom (Wrexham)	Mudd, David
Evans, Gwynfor (Carmarthen)	Pardoe, John	TELLERS FOR THE AYES:
Ewing, Mrs Winifred (Moray)	Penhaligon, David	Mr. John P. Mackintosh and
Fairgrieve, Russell	Reid, George	Mr. Russell Johnston.
Gray, Hamish	Ross, Stephen (Isle of Wight)
NOES
Abse, Leo	Clark, Alan (Plymouth, Sutton)	Fletcher, Ted (Darlington)
Allaun, Frank	Clark, William (Croydon S)	Fookes, Miss Janet
Anderson, Donald	Clarke, Kenneth (Rushcliffe)	Foot, Rt Hon Michael
Archer, Rt Hon Peter	Clemitson, Ivor	Ford, Ben
Ashton, Joe	Cocks, Rt Hon Michael (Bristol S)	Forrester, John
Atkins, Rt Hon H. (Spelthorne)	Cohen, Stanley	Fowler, Gerald (The Wrekin)
Atkins, Ronald (Preston N)	Cope, John	Fraser, John (Lambeth, N'W'C)
Atkinson, Norman	Corbett, Robin	Freeson, Rt Hon Reginald
Barnett, Rt Hon Joel (Heywood)	Cowans, Harry	Fry, Peter
Bates, Alf	Cox, Thomas (Tooting)	Gardiner, George (Reigate)
Bean, R. E.	Crawshaw, Richard	Gardner, Edward (S Fylde)
Bell, Ronald	Cronin, John	Garrett, John (Norwich S)
Bennett, Andrew (Stockport N)	Crowder, F. P.	Garrett, W. E. (Wallsend)
Benyon, W.	Crowther, Stan (Rotherham)	George, Bruce
Berry, Hon Anthony	Cryer, Bob	Gllbert, Rt Hon Dr John
Biffen, John	Dalyell, Tam	Glyn, Dr Alan
Biggs-Davison, John	Davidson, Arthur	Godber, Rt Hon Joseph
Bishop, Rt Hon Edward	Davies, Rt Hon Denzil	Golding, John
Blenkinsop, Arthur	Davies, Ifor (Gower)	Goodhew, Victor
Boardman, H.	Davies, Rt Hon J. (Knutsford)	Gourlay, Harry
Body, Richard	Davis, Clinton (Hackney C)	Gow, Ian (Eastbourne)
Booth, Rt Hon Albert	Dean, Joseph (Leeds West)	Gower, Sir Raymond (Barry)
Bottomley, Rt Hon Arthur	Dean, Paul (N Somerset)	Graham, Ted
Bottomley, Peter	Dell, Rt Hon Edmund	Grant, George (Morpeth)
Boyden, James (Bish Auck)	Dempsey, James	Grieve, Percy
Boyson, Dr Rhodes (Brent)	Dodsworth, Geoffrey	Grist, Ian
Bradley, Tom	Doig, Peter	Grocott, Bruce
Brittan, Leon	Dormand, J. D.	Hall-Davis, A. G. F.
Brooke, Peter	Douglas-Hamilton, Lord James	Hampson, Dr Keith
Brown, Sir Edward (Bath)	Drayson, Burnaby	Harrison, Col Sir Harwood (Eye)
Brown, Hugh D. (Provan)	Dykes, Hugh	Harrison, Rt Hon Walter
Brown, Robert C. (Newcastle W)	Eadie, Alex	Harvie Anderson, Rt Hon Miss
Buchanan, Richard	Edge, Geoff	Hattersley, Rt Hon Roy
Budgen, Nick	Ellis, John (Brigg & Scun)	Hayman, Mrs Helene
Bulmer, Esmond	English, Michael	Healey, Rt Hon Denis
Butler, Adam (Bosworth)	Ennals, Rt Hon David	Heffer, Eric S.
Butler, Mrs Joyce (Wood Green)	Evans, Fred (Caerphilly)	Hodgson, Robin
Callaghan, Jim (Middleton & P)	Evans, Ioan (Aberdare)	Hooley, Frank
Campbell, Ian	Ewing, Harry (Stirling)	Horam, John
Cant, R. B.	Farr, John	Howell, Rt Hon Denis (B'ham, Sm H)
Carter-Jones, Lewis	Fernyhough, Rt Hon E.	Howell, Ralph (North Norfolk)
Chalker, Mrs Lynda	Flannery, Martin	Hoyle, Doug (Nelson)
Huckfield, Les	Mikardo, Ian	Sheldon, Rt Hon Robert
Hughes, Rt Hon C. (Anglesey)	Millan, Rt Hon Bruce	Shore, Rt Hon Peter
Hunter, Adam	Miller, Hal (Bromsgrove)	Silkin, Rt Hon John (Deptford)
Hutchison, Michael Clark	Mitchell, David (Basingstoke)	Silkin, Rt Hon S. C. (Dulwich)
Irvine, Rt Hon Sir A. (Edge Hill)	Molloy, William	Silverman, Julius
Irving, Rt Hon S. (Dartford)	Monro, Hector	Skeet, T. H. H.
Jackson, Colin (Brighouse)	Moonman, Eric	Skinner, Dennis
Jackson, Miss Margaret (Lincoln)	Morgan, Geraint	Small, William
James, David	Morgan-Giles, Rear-Admiral	Smith, Dudley (Warwick)
Janner, Greville	Morris, Rt Hon J. (Aberavon)	Smith, John (N Lanarkshire)
Jay, Rt Hon Douglas	Morris, Michael (Northampton S)	Smith, Timothy John (Ashfield)
Jenkin, Rt Hon P. (Wanst'd&W df'd)	Morrison, Hon Peter (Chester)	Snape, Peter
Jenkins, Hugh (Putney)	Moyle, Roland	Spicer, Jim (W Dorset)
John, Brynmor	Murray, Rt Hon Ronald King	Spicer, Michael (S Worcester)
Johnson, James (Hull West)	Neave, Airey	Spriggs, Leslie
Jones, Alec (Rhondda)	Nelson, Anthony	Sproat, Iain
Jones, Barry (East Flint)	Neubert, Michael	Stainton, Keith
Jones, Dan (Burnley)	Newens, Stanley	Stallard, A. W.
Joseph, Rt Hon Sir Keith	Noble, Mike	Steen, Anthony (Wavertree)
Judd, Frank	Oakes, Gordon	Stewart, Rt Hon M. (Fulham)
Kaufman, Gerald	Ogden, Eric	Stoddart, David
Kellett-Bowman, Mrs Elaine	O'Halloran, Michael	Stokes, John
Kelley, Richard	Oppenheim, Mrs Sally	Stradling Thomas, J.
Kilroy-Silk, Robert	Orme, Rt Hon Stanley	Strang, Gavin
Kinnock, Neil	Ovenden, John	Strauss, Rt Hon G. R.
Knight, Mrs Jill	Page, John (Harrow West)	Summerskill, Hon Dr Shirley
Lamborn, Harry	Page, Richard (Workington)	Swain, Thomas
Langford-Holt, Sir John	Palmer, Arthur	Taylor, Mrs Ann (Bolton W)
Latham, Arthur (Paddington)	Park, George	Taylor, R. (Croydon NW)
Latham, Michael (Melton)	Parker, John	Taylor, Teddy (Cathcart)
Le Marchant, Spencer	Parry, Robert	Thomas, Jeffrey (Abertillery)
Lester, Jim (Beeston)	Pattie, Geoffrey	Thomas, Mike (Newcastle E)
Lestor, Miss Joan (Eton & Slough)	Perry, Ernest	Thomas, Ron (Bristol NW)
Litterick, Tom	Phipps, Dr Colin	Tierney, Sydney
Loveridge, John	Price, C. (Lewisham W)	Tomlinson, John
Loyden, Eddie	Price, David (Eastleigh)	Torney, Tom
Luard, Evan	Pym, Rt Hon Francis	Townsend, Cyril D.
Luce, Richard	Radice, Giles	Varley, Rt Hon Eric G.
Lyons, Edward (Bradford W)	Rathbone, Tim	Viggers, Peter
McCartney, Hugh	Rees, Rt Hon Merlyn (Leeds S)	Wainwright, Edwin (Dearne V)
McDonald, Dr Oonagh	Renton, Rt Hon Sir D. (Hunts)	Wakeham, John
McElhone, Frank	Renton, Tim (Mid-Sussex)	Walker, Terry (Kingswood)
Macfarlane, Neil	Richardson, Miss Jo	Ward, Michael
MacGregor, John	Ridley, Hon Nicholas	Watkins, David
McGuire, Michael (Ince)	Rifkind, Malcolm	Wellbeloved, James
MacKenzie, Rt Hon Gregor	Roberts, Albert (Normanton)	White, Frank R. (Bury)
McMillan, Tom (Glasgow C)	Roberts, Gwilym (Cannock)	White, James (Pollok)
McNamara, Kevin	Roberts, Wyn (Conway)	Whitlock, William
Madden, Max	Robinson, Geoffrey	Willey, Rt Hon Frederick
Magee, Bryan	Roderick, Caerwyn	Williams, Rt Hon Alan (Swansea W)
Mallalieu, J. P. W.	Rodgers, George (Chorley)	Williams, Alan Lee (Hornch'ch)
Marks, Kenneth	Rodgers, Rt Hon William (Stockton)	Williams, Sir Thomas (Warrington)
Marshall, Dr Edmund (Goole)	Rooker, J. W.	Wilson, Alexander (Hamilton)
Marshall, Jim (Leicester S)	Ross, Rt Hon W. (Kilmarnock)	Wilson, William (Coventry SE)
Marten, Neil	Rost, Peter (SE Derbyshire)	Woodall, Alec
Mates, Michael	Rowlands, Ted	Woof, Robert
Maude, Angus	Royle, Sir Anthony	Young, Sir G. (Ealing, Acton)
Mawby, Ray	Sedgemore, Brian
Maxwell-Hyslop, Robin	Sever, John	TELLERS FOR THE NOES:
Maynard, Miss Joan	Shaw, Arnold (Ilford South)	Mr. James Hamilton and
Mellish, Rt Hon Robert	Shaw, Michael (Scarborough)	Mr. James Tinn.
Mendelson, John

Question accordingly negatived.

The CHAIRMAN then proceeded to put forthwith the Questions necessary for the disposal of the Business to be concluded at Eleven o'clock.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 229, Noes 210.

Division No. 53]	AYES	[11.14 p.m.
Allaun, Frank	Booth, Rt Hon Albert	Cant, R. B.
Archer, Rt Hon Peter	Bottomley, Rt Hon Arthur	Carmichael, Neil
Ashton, Joe	Boyden, James (Bish Auck)	Carter-Jones, Lewis
Atkinson, Norman	Bradley, Tom	Clemitson, Ivor
Bain, Mrs Margaret	Bray, Dr Jeremy	Cocks, Rt Hon Michael (Bristol S)
Barnett, Rl Ron Joel (Heywood)	Brown, Hugh D. (Provan)	Cohen, Stanley
Bates, Alf	Brown, Robert C. (Newcastle W)	Cook, Robin F. (Edin C)
Bean, R. E.	Buchan, Norman	Corbett, Robin
Berth, A. J.	Buchanan, Richard	Cox, Thomas (Tooting)
Bennett, Andrew (Stockport N)	Butler, Mrs Joyce (Wood Green)	Craig, Rt Hon W. (Belfast E)
Bishop, Rt Hon Edward	Callaghan, Jim (Middleton & P)	Craigen, Jim (Maryhill)
Blenkinsop, Arthur	Campbell, Ian	Crawford, Douglas
Boardman, H.	Canavan, Dennis	Crawshaw, Richard
Cronin, John	John, Brynmor	Ross, Stephen (Isle of Wight)
Crowther, Stan (Rotherham)	Johnson, James (Hull West)	Ross, Rt Hon W. (Kilmarnock)
Cryer, Bob	Johnston, Russell (Inverness)	Rowlands, Ted
Davidson, Arthur	Jones, Alec (Rhondda)	Sedgemore, Brian
Davies, Rt Hon Denzil	Jones, Barry (East Flint)	Sever, John
Davies, Ifor (Gower)	Jones, Dan (Burnley)	Shaw, Arnold (Ilford South)
Davis, Clinton (Hackney C)	Judd, Frank	Sheldon, Rt Hon Robert
Dean, Joseph (Leeds West)	Kaufman, Gerald	Shore, Rt Hon Peter
Dell, Rt Hon Edmund	Kelley, Richard	Silkin, Rt Hon John (Deptford)
Dempsey, James	Kerr, Russell	Silkin, Rt Hon S. C. (Dulwich)
Doig, Peter	Kilroy-Silk. Robert	Silverman, Julius
Dormand, J. D.	Lambie, David	Skinner, Dennis
Douglas-Mann, Bruce	Lamborn, Harry	Small, William
Eadie, Alex	Lestor, Miss Joan (Eton & Slough)	Smith, Cyril (Rochdale)
Edge, Geoff	Litterick, Tom	Smith, John (N Lanarkshire)
Ellis, John (Brigg & Scun)	Loyden, Eddie	Snape, Peter
Ellis, Tom (Wrexham)	Luard, Evan	Spriggs, Leslie
English, Michael	Lyons, Edward (Bradford W)	Stallard, A. W.
Ennals, Rt Hon David	McCartney, Hugh	Steel, Rt Hon David
Evans, Gwynfor (Carmarthen)	MacCormick, Iain	Stewart, Rt Hon Donald
Ewing, Harry (Stirling)	McDonald, Do Oonagh	Stewart, Rt Hon M. (Fulham)
Ewing, Mrs Winifred (Moray)	McElhone, Frank	Stoddart, David
Fernyhough, Rt Hon E.	MacFarquhar, Roderick	Strang, Gavin
Flannery, Martin	McGuire, Michael (Ince)	Strauss, Rt Hon G. R.
Fletcher, Ted (Darlington)	MacKenzie, Rt Hon Gregor	Summerskill, Hon Dr Shirley
Foot, Rt Hon Michael	Mackintosh, John P.	Swain, Thomas
Ford, Ben	McMillan, Tom (Glasgow C)	Taylor, Mrs Ann (Bolton W)
Forrester, John	McNamara, Kevin	Thomas, Dafydd (Merioneth)
Fowler, Gerald (The Wrekin)	Madden, Max	Thomas, Jeffrey (Abertillery)
Fraser, John (Lambeth, N'w'd)	Magee, Bryan	Thomas, Mike (Newcastle E)
Freeson, Rt Hon Reginald	Mallalieu, J. P. W.	Thomas, Ron (Bristol NW)
Garrett, John (Norwich S)	Marks, Kenneth	Thompson, George
George, Bruce	Marshall, Dr Edmund (Goole)	Thorne, Stan (Preston South)
Gilbert, Rt Hon Dr John	Maynard, Miss Joan	Tierney, Sydney
Golding, John	Mellish, Rt Hon Robert	Tinn, James
Gourlay, Harry	Mikardo, Ian	Tomlinson, John
Graham Ted	Millan, Rt Hon Bruce	Torney, Tom
Grant, George (Morpeth)	Miller, Dr M. S. (E Kilbride)	Varley, Rt Hon Eric G.
Grimond, Rt Hon J.	Molloy, William	Wainwright, Edwin (Dearne V)
Grocott, Bruce	Morris, Rt Hon J. (Aberavon)	Wainwright, Richard (Colne V)
Hamilton, James (Bothwell)	Moyle, Roland	Walker, Terry (Kingswood)
Harrison, Rt Hon Walte.	Murray, Rt Hon Ronald King	Ward, Michael
Hattersley, Rt Hon Roy	Newens, Stanley	Watkins, David
Hayman, Mrs Helene	Noble, Mike	Watt, Hamish
Healey, Rt Hon Denis	Oakes, Gordon	Weetch, Ken
Heffer, Eric S.	Ogden, Eric	Wellbeloved, James
Henderson, Douglas	O'Halloran, Michael	White, James (Pollok)
Hooley, Frank	Orme, Rt Hon Stanley	Whitehead, Phillip
Hooson, Emlyn	Palmer, Arthur	Whitlock, William
Horam, John	Pardoe, John	Wigley, Dafydd
Howell, Rt Hon Denis (B'ham, Sm H)	Park, George	Willey, Rt Hon Frederick
Howells, Geraint (Cardigan)	Parry, Robert	Williams, Rt Hon Alan (Swansea W)
Hoyle, Doug (Nelson)	Penhaligon, David	Williams, Alan Lee (Hornch'ch)
Huckfield, Les	Perry, Ernest	Williams, Sir Thomas (Warrington)
Hughes, Rt Hon C. (Anglesey)	Price, C. (Lewisham W)	Wilson, Alexander (Hamilton)
Hughes, Robert (Aberdeen N)	Radice, Giles	Wilson, Gordon (Dundee E)
Hughes, Roy (Newport)	Rees, Rt Hon Merlyn (Leeds S)	Wilson, William (Coventry SE)
Hunter, Adam	Reid, George	Wise, Mrs Audrey
Irvine, Rt Hon Sir A. (Edge Hill)	Richardson, Miss Jo	Woodall, Alec
Irving, Rt Hon S. (Dartford)	Roberts, Albert (Normanton)	Woof, Robert
Jackson, Colin (Brighouse)	Robinson, Geoffrey
Jackson, Miss Margaret (Lincoln)	Roderick, Caerwyn	TELLERS FOR THE AYES:
Janner, Greville	Rodgers, George (Chorley)	Mr. Jim Marshall and
Jay, Rt Hon Douglas	Rodgers, Rt Hon William (Stockton)	Mr. Frank R. White.
Jenkins, Hugh (Putney)	Rooker, J. W.
NOES
Abse, Leo	Boyson, Dr Rhodes (Brent)	Clarke, Kenneth (Rushcliffe)
Adley, Robert	Bradford, Rev Robert	Clegg, Walter
Alison, Michael	Braine, Sir Bernard	Cooke, Robert (Bristol W)
Atkins, Rt Hon H. (Spelthorne)	Brittan, Leon	Cope, John
Atkins, Ronald (Preston N)	Brooke, Peter	Cormack, Patrick
Atkinson, David (Bournemouth, East)	Brotherton, Michael	Corrie, John
Baker, Kenneth	Brown, Sir Edward (Bath)	Costain, A. P.
Banks, Robert	Bryan, Sir Paul	Crouch, David
Bell, Ronald	Buchanan-Smith, Alick	Crowder, F. P.
Bennett, Dr Reginald (Fareham)	Buck Anthony	Cunningham, G. (Islington S)
Benyon, W.	Budgen, Nick	Dalyell, Tam
Berry, Hon Anthony	Bulmer, Esmond	Davies, Rt Hon J. (Knutsford)
Biffen, John	Butler, Adam (Bosworth)	Dean, Paul (N Somerset)
Biggs-Davison, John	Carlisle, Mark	Dodsworth, Geoffrey
Body, Richard	Chalker, Mrs Lynda	Drayson, Burnaby
Boscawen, Hon Robert	Churchill, W. S.	du Cann, Rt Hon Edward
Bottomley, Peter	Clark, Alan (Plymouth, Sutton)	Durant, Tony
Bowden, A. (Brighton, Kemptown)	Clark, William (Croydon S)	Dykes, Hugh

Edwards, Nicholas (Pembroke)	Lamond, James	Rathbone, Tim
Evans, Ioan (Aberdare)	Lamont, Norman	Renton, Rt. Hon. Sir D. (Hunts)
Eyre, Reginald	Langford-Holt, Sir John	Renton, Tim (Mid-Sussex)
Fairbairn, Nicholas	Latham, Michael (Melton)	Ridley, Hon. Nicholas
Fairgrieve, Russell	Lawson, Nigel	Ridsdale, Julian
Farr, John	Le Marchant, Spencer	Rifkind, Malcolm
Fisher, Sir Nigel	Lester, Jim (Beeston)	Roberts, Michael (Cardiff NW)
Fookes, Miss Janet	Lewis, Kenneth (Rutland)	Roberts, Wyn (Conway)
Forman, Nigel	Loveridge, John	Ross, William (Londonderry)
Fowler, Norman (Sutton C'f'd)	Luce, Richard	Rossi, Hugh (Hornsey)
Fox, Marcus	McCusker, H.	Rost, Peter (SE Derbyshire)
Fry, Peter	Macfarlane, Neil	Royle, Sir Anthony
Gardiner, George (Reigale)	MacGregor, John	Sainsbury, Tim
Gardner, Edward (S. Fylde)	McNair-Wilson, P. (New Forest)	Scott, Nicholas
Garrett, W. E. (Wallsend)	Marshall, Michael (Arundel)	Shaw, Giles (Pudsey)
Gilmour, Sir John (East Fife)	Marten, Neil	Shelton, William (Streatham)
Glyn, Dr. Alan	Mates, Michael	Shepherd, Colin
Godber, Rt. Hon. Joseph	Mather, Carol	Silvester, Fred
Goodhew, Victor	Maude, Angus	Sims, Roger
Goodlad, Alastair	Maudling, Rt. Hon. Reginald	Sinclair, Sir George
Gow, Ian (Eastbourne)	Mawby, Ray	Skeet, T. H. H.
Gower, Sir Raymond (Barry)	Maxwell-Hyslop, Robin	Smith, Dudley (Warwick)
Gray, Hamish	Mayhew, Patrick	Smith, Timothy John (Ashfield)
Grieve, Percy	Miller, Hal (Bromsgrove)	Spence, John
Griffiths, Eldon	Mills, Peter	Spicer, Jim (W. Dorset)
Grist, Ian	Mitchell, David (Basingstoke)	Spicer, Michael (S. Worcester)
Grylls, Michael	Molyneaux, James	Sproat, Iain
Hall-Davis, A. G. F.	Monro, Hector	Stainton, Keith
Hamilton, Michael (Salisbury)	Moonman, Eric	Stanbrook, Ivor
Hampson, Dr. Keith	Morgan, Geraint	Stanley, John
Harrison, Col. Sir Harwood (Eye)	Morgan-Giles, Rear-Admiral	Steen, Anthony (Wavertree)
Harvie Anderson, Rt. Hon. Miss	Morris, Michael (Northampton S.)	Stewart, Ian (Hitchin)
Haselhurst, Alan	Morrison, Charles (Devizes)	Stokes, John
Hayhoe, Barney	Morrison, Hon. Peter (Chester)	Stradling Thomas, J.
Hicks, Robert	Mudd, David	Tapsell, Peter
Higgins, Terence L.	Neave, Airey	Taylor, R. (Croydon NW)
Hodgson, Robin	Nelson, Anthony	Taylor, Teddy (Cathcart)
Hordern, Peter	Neubert, Michael	Tebbit, Norman
Howe, Rt. Hon. Sir Geoffrey	Newton, Tony	Townsend, Cyril D.
Howell, David (Guildford)	Normanton, Tom	Trotter, Neville
Howell, Ralph (North Norfolk)	Nott, John	van Straubenzee, W. R.
Hunt, John (Ravensbourne)	Oppenheim, Mrs. Sally	Vaughan, Dr. Gerard
Hurd, Douglas	Page, John (Harrow West)	Viggers, Peter
Hutchison, Michael Clark	Page, Rt. Hon. R. Graham (Crosby)	Wakeham, John
James, David	Page, Richard (Workington)	Walder, David (Clitheroe)
Jenkin, Rt. Hon. P. (Wanst'd & W'df'd)	Parker, John	Wall, Patrick
Joseph, Rt. Hon. Sir Keith	Pattie, Geoffrey	Weatherill, Bernard
Kellett-Bowman, Mrs. Elaine	Phipps, Dr. Colin	Wells, John
Kershaw, Anthony	Pink, R. Bonner	Wiggin, Jerry
King, Tom (Bridgwater)	Powell, Rt. Hon. J. Enoch
Kinnock, Neil	Price, David (Eastleigh)	TELLERS FOR THE NOES:
Knight, Mrs. Jill	Prior, Rt. Hon. James	Sir George Young and
Knox, David	Pym, Rt. Hon. Francis	Lord James Douglas-Hamilton.

Question accordingly agreed to.

Clause 42 ordered to stand part of the Bill.

Clauses 43 to 45 ordered to stand part of the Bill.