HC Deb 23 February 1998 vol 307 cc82-91
Mr. Donald Gorrie (Edinburgh, West)

I beg to move amendment No. 408, in page 30, line 26, leave out 'tax-varying' and insert 'tax-increasing'.

The Chairman of Ways and Means (Sir Alan Haselhurst)

With this, it will be convenient to discuss amendment No. 366, in page 30, line 28, leave out '2000–01' and insert '2002–03'.

Mr. Gorrie

Our amendment would replace "tax-varying" with "tax-increasing". Opposition Members in the Scottish Parliament could propose a reduction in taxes, but only members of the Government could propose increased taxes. According to my hon. Friends, who are more experienced than I, that is the practice in this House. In giving Opposition Members as much freedom as possible, it would be reasonable to allow them to propose tax-reducing measures.

The amendment might appeal to Conservatives in particular. They are concerned about tax raising. If they succeed in having Members elected to the Scottish Parliament, they could propose tax-reducing measures. I am confused about where the Conservatives are coming from. Leaks to the press suggest that their leader is taking them in a new direction and that devolution and all associated with it is a good thing, although it should apply to the English as well as to the Scots. But today we are hearing the same old story: anything that the Scottish Parliament will be able to do must be bad.

Dr. Fox

The hon. Gentleman was not even here.

Mr. Gorrie

I beg your pardon.

The Chairman

Order. The hon. Gentleman is addressing the Chair in all remarks.

Mr. Gorrie

I beg your pardon, Sir Alan. I was being interrupted.

The amendment is straightforward. It is not of huge moment, but the conduct of the Scottish Parliament would be improved marginally if Opposition Members were allowed to propose a reduction in taxation.

7.15 pm

We do not support the Conservatives' proposal which would deny the Scottish Parliament the right to introduce tax-varying powers as soon as it wished. If it is to be a serious Parliament and is to have those powers, it should be allowed to use them.

Mr. Dalyell

I should like to ask about retrospection. What will be the combined effect of subsections (3) and (4) of clause 70? Subsection (3)(a) suggests that a determination of the UK Parliament may be made after the beginning of the year without it expressly being stated that such determination is necessarily to be effected in the year in question. Will not that have the consequence that, in theory, the tax-varying power could be applied retrospectively? In the hands of lawyers, that would be more than an arcane point.

I should also like to ask about double tax treaty relief. The vast majority of UK double tax treaties specifically refer to UK income tax. The provision that Scottish income tax will also qualify for double tax relief must be clarified. Clauses 69, 70 and 71 appear to replace the non-varied rate with a varied rate for Scottish taxpayers, but would the UK income tax rate still apply? Those two questions are rather significant.

Mr. Grieve

I was surprised at the comments of the hon. Member for Edinburgh, West (Mr. Gorrie). I understood that the amendment would limit the power of the Scottish Executive to move a motion to increase taxes. That perhaps was not a total surprise because of the reality in which the Bill will operate, but it was still a considerable surprise in the light of the representations made by the Government in the referendum campaign.

Many hon. Members will have no difficulty in agreeing that in the Scottish Parliament the Opposition should be able to table motions to reduce taxation, but that is not what would be achieved. I stand to be corrected, but my reading of this simple alteration is that the Scottish Executive would be allowed to move a motion to vary tax only upwards.

Mr. Wallace

It would mean that only a member of the Scottish Executive could propose a tax-increasing measure whereas any Member of the Scottish Parliament could propose a tax-reducing measure, which is precisely the position in this House.

Mr. Grieve

If that is what the Liberal Democrats seek, a further amendment is required.

Mr. Wallace

The hon. Gentleman has not read the amendment properly.

Mr. Grieve

I beg to differ.

Amendment No. 366 would postpone for one year the implementation of the tax-varying powers. It is not an attempt to curb the power of the Scottish Parliament: it reflects the debate that we have had this evening. It is abundantly clear that if the tax-varying powers are to operate successfully, they will require careful attention. The people in Scotland who will have to pay will need to prepare carefully, and may decide to save into pensions or into equities. Given the minutiae that the Inland Revenue has presented us with, it is abundantly clear that accountants and tax lawyers will have a field day interpreting these provisions.

I hope that the Minister recognises that I have accepted that we must smooth the way for these changes. The provisions must be seen in the context of the real changes in the relationship between Edinburgh and Westminster. These tax measures add an extra and complex layer to what is already an extremely complex period of change.

It is clear from the White Paper on devolution that the Scottish Parliament is intended to be up and running over a period from May 1999 onwards. In those circumstances, the tax-varying powers should be postponed for 12 months, so that we can experience how the relationship between the Scottish Parliament and the United Kingdom Parliament and Government operates in practice. We trust that the Scottish Parliament will have a long life, so that seems a small concession to prudence. It would be a worthwhile concession, given the burden that will have to be borne by those in office.

Mr. Alex Salmond (Banff and Buchan)

I am puzzled about amendment No. 366, which would delay the change in the Scottish taxation provisions. Does it mean that the Conservative party has abandoned any attempt to lower the level of taxation that the Scottish Parliament can raise? Has it merely abandoned its attempt to do so until 2002–03, or has it abandoned any hope of doing so at any time?

Mr. Grieve

The hon. Member for Banff and Buchan (Mr. Salmond) misunderstands the position. We may argue in the future for a reduction in taxes in Scotland. We are concerned about the transitional period when these complex constitutional measures are being introduced. They will undoubtedly need to be smoothed through. I realise that the hon. Gentleman may not want them to be smoothed through, although he often argues to the contrary.

On a number of occasions, the hon. Gentlemen the has told the House that it is particularly important that the Scottish Parliament works for the benefit of the Scottish people. Assuming that he wants it to be up and running effectively, it may be more sensible for the stages to be introduced gradually. The hon. Gentleman has attended some of the debate, but not all of it, and if he had listened to the details of the tax principles, he would realise that there will be complex problems.

We take the view that there is no point adding to those problems. It may benefit the operation of the Scottish Parliament and smooth its relations with the House if, when it is up and running, there are no tax-varying powers for 12 months and those changes are held over until the following year.

Mr. McAllion

I congratulate the hon. Gentleman on his elevation to the Opposition Front Bench. He certainly improves the quality, although that is not very difficult. If he wants to postpone the tax-varying powers of the Scottish Parliament for 12 months, why does amendment No. 366 postpone it for 24 months, from 2000–01 to 2002–03? Surely, if that is what he is trying to achieve, the amendment is wrong.

Mr. Grieve

I think not. The amendment would leave out 2000–01 and would insert 2002–03.

Mr. McAllion

That is two years.

Mr. Grieve

If that is the case, all the better. The purpose of the amendment is to allow a transitional period during which there would be no tax-varying powers.

Mr. McAllion

How long is that period?

Mr. Grieve

The amendment would introduce the powers in 2002–03.

Mr. McAllion

How long is that?

Mr. Grieve

If I may say to the hon. Gentleman, we have still not had complete clarity from the Government on how the transitional period from 1999 will operate.

I ask the Minister to consider the desirability of a transitional period before the tax-varying powers are introduced. I suggest that postponing the introduction of those powers until 2002 would be a valuable change.

Mr. Swinney

Before the hon. Member for Dundee, East (Mr. McAllion) intervened, I was going to welcome the hon. Member for Beaconsfield (Mr. Grieve) to the Opposition Front Bench. As a result of his rapid promotion to the Front Bench, I thought that my hon. Friends the Members for Moray (Mrs. Ewing) and for Banff and Buchan (Mr. Salmond) may think that it was time for young men to be put into the limelight of debate, but perhaps they were not paying careful attention. Having heard the hon. Gentleman's contribution, I do not think that he is a threat to some of his right hon. and hon. Friends on the Front Bench.

The hon. Member for Edinburgh, West (Mr. Gorrie) referred to the ability of Back Benchers to propose a motion to reduce taxation. That is a sensible measure and reflects the established procedure of the House. It would enable Back Benchers outwith the Scottish Executive to utilise the powers that are given to the Parliament. In a strange way, it may give Conservatives something to do and on which to focus when they get into the Scottish Parliament. They could try to challenge the other parties, which they think are determined to use the tax-varying powers only to increase taxation.

Amendment No. 366 would delay the implementation of these powers. We must bear in mind some practical realities. The Parliament will be elected in May 1999, and it will assume its responsibilities in 2000. A party making a tax-varying proposal at the election in May 1999 should be confident of delivering that proposal in the time scale offered by the legislation. Such a proposal in an election manifesto would not stand up to scrutiny on the hustings if it could not be delivered in the time scale provided by the Bill.

The legislation enables parties to formulate their proposals and to judge whether they are able to implement them in the proposed time scale. I am not clear whether the Conservatives want to delay the implementation of these powers for 12 months or 24 months, but it seems to be more than 12. The amendment is symptomatic of the arguments that we have heard from Conservatives recently. They want to put obstacles in the way of the Parliament assuming the powers in the Bill, and to delay the Scottish people assuming responsibility for a proportion of their own affairs. The sooner the Scottish people are able to exercise their discretion over these matters of policy the better. I have no time for amendment No. 366.

The hon. Member for Beaconsfield referred to the need for gradual change. Some of us are concerned that gradual change has been slow in coming. The people of Scotland have decisively voted for the Parliament to be set up on this basis, so we should not impede it from assuming the powers that it was promised.

Mr. McAllion

I did not want to speak in this short debate, but I felt that the Conservative Front-Bench contribution required a response from Back Benchers. I regard the hon. Member for Beaconsfield (Mr. Grieve), who has been elevated to the Front Bench, as one of the brightest and best Opposition Members—certainly given what he has said during our debates on the Bill—but, when he cannot even tell the difference between the year 2000 and the year 2002, assuming that it is 12 months, we have to worry about the quality of the Conservative party and the likelihood of its returning to office. It is clear that even the brightest and best cannot count. But perhaps the Conservatives have an aversion to counting following the last general election, when results went badly against them.

Let us consider the substance of the debate. Hon. Members want the elected Scottish Parliament to be able to introduce a Budget in the first year in which it takes over—a distinctive Budget: the Budget of the Scottish Parliament, rather than simply a Scottish Office block that is decided here and handed down. They want a definite budget, which will draw its strength from the mandate received by Members of the Scottish Parliament from the Scottish people.

I cannot see the purpose of the amendment, other than dog-in-the-manger opposition to what the Scottish people have already voted for. A referendum has taken place, and a huge number of Scottish people voted to give the Parliament a tax-varying power. The Parliament will be elected in May 1999; there will be almost a "shadow" year during which it can come to terms with the new responsibilities that it will take. In that time, accountants and tax lawyers will be able to engage in consultations with the Parliament on what its first Budget may entail. But if the parties elected to that Parliament have been elected on the basis of a manifesto that states that it should vary the rate of income tax in Scotland—whether by 1p, 2p or 3p—by increasing it, that is democracy, and the Scottish Administration will have the right to introduce such a measure in their first Budget.

7.30 pm
Mr. Grieve

I take in good part the hon. Gentleman's views about my mathematical abilities, but let us confine ourselves to the principle for a moment. Surely the issue is not the Scottish Parliament's ability to deal with the matter; surely it is the fact that all the other associated bodies in Scotland—and the people, and the accountants, and everyone else—will have to prepare for the change. That is not a political but a practical issue, and that is why we sought the postponement.

Mr. McAllion

I understand that, since 11 September 1997, it has been clear to everyone in Scotland that the change is about to happen. That means that there are two and a half years in which to prepare for the change before the Scottish Administration introduce their first Budget in April 2000. I do not see the need for us to allow the extra two years that the Conservatives are suggesting. The fact is that they do not like the change: they would prefer the Scottish people not to have voted for it, and they would prefer the Scottish people to elect to the Scottish Parliament a party committed to not implementing it. That, however, is up to the Scottish people. It is not up to amendments tabled in the House of Commons to prevent the Scottish people from electing a party that will introduce the changes contained in its manifesto.

In an earlier debate, someone said that the proportional representation election system—which might lead to a coalition Government here—would lead to taxes being increased through the back door against the wishes of the Scottish people. Hon. Members seem to misunderstand the nature of that system. It means that, unless more than 50 per cent. of people back the Administration, that Administration will not be able to increase taxes in the Scottish Parliament.

It is almost like the old ladies in the Carlton club who said, when they heard in 1951 that a Labour Government had been elected with an overwhelming majority, "The country will not stand for this." They did not understand that the country had just voted for a Labour Government. The Tories have not yet understood that Scotland as a country has voted for a Scottish Parliament with tax-varying powers, and may well vote for parties that will use those powers when they are in government. There is no reason on God's earth why any hon. Member should stop or delay the exercise of democracy in Scotland. That is what devolution is all about.

Mr. Ancram

The hon. Gentleman is always very keen to bring my hon. Friends and me to task when we get things wrong. Will he tell us again who were elected to office in 1951?

Mr. McAllion

I believe that the Conservative party was elected, following the policies that a Labour Government had produced in 1945. If I remember rightly, the Conservatives adopted those policies lock, stock and barrel—much as new Labour has done with Tory policies.

The point that I am trying to make is that, under a system of democracy, the people decide how taxes should be levied in their country. That is why I am keen for my hon. Friend the Minister to oppose amendment No. 366, which I consider anti-democratic and very much in the nature of the Conservative party as it has been for the past 25 years. Sooner or later, the Conservatives will have to learn the lesson that they cannot continue to preach to the Scottish people that they do not know what they are doing, and that if they vote for tax-varying powers there is something wrong with them. Of course there is not; there is something wrong with the Conservative party, if it cannot accept the decision of the Scottish people and continues to try to oppose it in the House of Commons with useless amendments such as this.

As for amendment No. 408, I do not agree that a Scottish Parliament should operate in the same way as this Parliament. Here, the Executive has the right to raise taxes, but the Opposition can move motions only for reductions in taxes. I did not know before that that was the position here, but it is, and I hope that it will not apply in the Scottish Parliament. I feel that Committees in the Scottish Parliament should be very different from Committees in the House of Commons, and that the nature of sovereignty in the Scottish Parliament should be very different from the operation of sovereignty here. I do not want an all-powerful Executive in the Scottish Parliament that will do much as it pleases, like the Executive here. I want powerful Committees that have the right to initiate legislation.

I do not see why the Finance Committee, or its Chairman, should not be able to propose an alternative Budget. If the Budget can gain the support of Members of the Scottish Parliament, what is wrong with that? It is a different way of working from the way in which this Parliament works, but surely, for goodness sake, as we enter the next millennium we can move away from the 19th-century ideas that dominate the operation of this Parliament. Surely we can move into the new millennium along with the rest of the world, rather than being locked in the 19th century.

I do not think that my hon. Friend the Minister should accept either amendment. Both are intended to interfere with the rights of the Scottish people to govern themselves.

Sir Robert Smith

Yet again, the hon. Gentleman fails to understand that, without our amendment, the arrangements will be even more restrictive than those governing this place. The Government propose that only the Executive can do anything when it comes to tax powers; we seek, at least in part, to widen that ability to the whole Parliament.

Mr. McAllion

I did not understand that. I am grateful to the hon. Gentleman for drawing it to my attention: if I had known that that was what the Government were about, I might have made a very different speech. [Interruption.] My hon. Friend the Minister, however, assures me that that is not the case, and, as he is such a nice man, I am prepared to trust him, if not others.

Mr. Salmond

The hon. Gentleman keeps referring to 19th-century practices in this place. Does he not think that that is a bit unfair? I cannot remember anything quite as modern as the 19th century here.

Mr. McAllion

I think that this place had its heyday in the 19th century. In those days, there was a coherent set of principles to which both Government and Opposition adhered—liberal capitalism. The 20th century produced different views about how society should be organised, and the emergence of the Labour party. I rejoice in such differences, however, because they continue to divide Government and Opposition. I resent the idea that we should all come together again in one big consensus and accept the new world order, the new capitalism and so on.

The Chairman

Order. The hon. Gentleman is going well wide of the amendment, in a debate that allows a limited amount of time.

Mr. McAllion

I am indeed going dangerously wide of the amendment, so I shall return to it.

If amendment No. 408 increases the powers of the Scottish Parliament over the Executive, I ask my hon. Friend the Minister to accept it. If it does not, I ask him to reject it.

Mrs. Laing

First, let me correct something that was said by the hon. Member for Dundee, East (Mr. McAllion).

The Chairman

I hope that it is something that was in order.

Mrs. Laing

It was not absolutely in order, Sir Alan, but the hon. Gentleman is way ahead of his time if he thinks that there are any ladies in the Carlton club.

The Chairman

Order. I gave the hon. Lady a hint, and I think that she should have taken it.

Mr. Salmond

There are women in the Tory party.

Mrs. Laing

The hon. Gentleman makes the point very well.

Let me turn to clause 70(5). With all due respect to my hon. Friend the Member for Beaconsfield (Mr. Grieve), I must agree with the interpretation of the hon. Member for Edinburgh, West (Mr. Gorrie) of his amendment. It seems to me that to change the words only a member of the Scottish Executive may move a motion for a tax-varying resolution to only a member of the Scottish Executive may move a motion for a tax-increasing resolution is a good idea, because it suggests that any other Member of the Scottish Parliament can propose a tax-reducing resolution. The amendment is good because only a Conservative Member of the Scottish Parliament is likely to move a tax-reducing resolution. History shows that only Conservatives aim at reducing taxes. Of course the amendment will be irrelevant when Conservatives control the Scottish Executive, and I am confident that they will.

Mr. Salmond

The Tory amendment delays any attempt to reduce taxes for another two years, and, in opposing the Liberal Democrat amendment, the Conservatives seek to delay a Conservative Opposition's ability to reduce taxes. It seems that Conservative Front-Bench spokesmen do not think that they will reduce taxes in government or in opposition and that implies that they do not think that they will be there at all.

Mrs. Laing

I understand the hon. Gentleman's point, but his interpretation is wrong. There is complete consistency in our attitude to the two amendments. Amendment No. 366 to change 2000–01 to 2002–03 aims to give a degree of certainty and stability to the Scottish people. Despite the way in which they voted in the referendum, the Scottish people do not deserve to have their tax and financial affairs and their political background changed every month or so.

Mr. Ancram

My hon. Friend makes interesting comments. I have some difficulty working my way through the double negative in the Liberal amendment. Does my hon. Friend agree that it is a typical example of a woolly Liberal Democrat amendment? Would not it have been much easier to say that Standing Orders shall ensure that any Member of the Scottish Parliament may move a motion for a tax-decreasing resolution? That would have been totally clear.

Mrs. Laing

I entirely agree with my right hon. Friend; it would have been much clearer. However, I give the Liberal Democrats some credit for doing the best that they can in the circumstances. Perhaps they do not have the faith to imagine that anyone will ever want to propose a tax-decreasing resolution. I certainly cannot imagine any Liberal Democrat introducing such a measure.

Mr. McLeish

I shall respond first to the questions that were posed by my hon. Friend the Member for Linlithgow (Mr. Dalyell). He asked about the combined effect of clause 70(3) and (4) to allow a Scottish rate to be applied retrospectively. The Law Society of Scotland made that point and the degree of retrospection that it suggested is not possible. I want to give my hon. Friend and the Law Society of Scotland a more detailed answer. My hon. Friend also asked about double tax treaty relief. Double tax relief credits will be allowed against income tax that is paid by Scottish taxpayers at any varied rate that has been determined by the Scottish Parliament.

Amendment No. 408 would indirectly, through the mechanism of Standing Orders, allow a resolution to lower income tax in Scotland to be moved by any Member of the Scottish Parliament while any tax-increasing resolution could be moved only by a member of the Scottish Executive. I do not accept that there is any logic in distinguishing between the process of moving tax-increasing or tax-reducing resolutions. The key point of principle is whether tax resolutions that are to be considered by the Scottish Parliament should be moved only by members of the Executive or whether it should be open to any Member of the Scottish Parliament to move such a resolution.

In reaching a decision on these matters, we have been guided by the Westminster model and by the need for the Executive to maintain control over the sources of their income. For example, the Bill does nothing to prevent general tax relief motions being discussed and voted on in the Parliament. I have had to truncate my response, but what I have outlined seems a sensible, pragmatic approach while the proposal in amendment No. 408 would be less so. I ask the Committee to reject that amendment.

Amendment No. 366 would effectively prevent the tax-varying power being exercised before the financial year 2001–02. If Labour were the governing party in the Scottish Parliament it would not use the tax-varying power during the lifetime of the current UK Parliament, which may take us to 2002–03. However, that is not a reason for statutorily preventing the Parliament from exercising the power in its first full year of operation, not least because I am not prepared to pre-judge the Scottish electorate's decision in the forthcoming Scottish parliamentary elections. It will be for each of the Scottish parties to make its proposals on tax and it will be for the voters to decide on which party and, therefore, which tax policy they wish to see. The Westminster Government should not deny the Scottish electorate that choice until 2002. I urge the Committee to reject the amendment. The Government are on target to make sure that the requisite provision is in place by 6 April 2000.

Mr. Gorrie

We do not accept the Minister's argument, but the issue is not of such substance that we wish to push the amendment to a vote. Perhaps the hon. Member for Dundee, East (Mr. McAllion) is right and we should have had a more far-reaching amendment.

It being a quarter to Eight o'clock, THE CHAIRMAN, pursuant to the Order [13 January] and the Resolution [this day], put forthwith the Question already proposed from the Chair.

Amendment negatived.

THE CHAIRMAN then proceeded to put forthwith the Question necessary for the disposal of the business to be concluded at that hour.

Clause 70 ordered to stand part of the Bill.

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