HL Deb 18 June 1997 vol 580 cc1235-7

3.14 p.m.

Lord Mackay of Ardbrecknish asked Her Majesty's Government:

What discussions have taken place between the Treasury and the Scottish Office on the impact of the tax-varying powers for the proposed Scottish parliament on government income from income tax.

Lord Haskel

My Lords, I appreciate the noble Lord's interests and concerns on this issue. He raised them in yesterday's debate. From that debate noble Lords will be aware that the Government intend to publish before the Summer Recess a White Paper setting out their devolution proposals for Scotland. I can however reassure him that Treasury and Scottish Office Ministers and officials are fully involved in the Government's collective consideration of their devolution proposals. That includes discussions on the tax-varying power for the Scottish parliament. Noble Lords will understand that I am unable to pre-empt those discussions.

Lord Mackay of Ardbrecknish

My Lords, is the noble Lord aware that I apologise for bringing him to the Dispatch Box again in place of the Treasury Minister, Lord Simon of Highbury, especially as he brings the Answer that he has just given to the House? If the noble Lord will look at yesterday's debate, he will see that I did not raise the matter then; I raised it in the debate on the gracious Speech. Is he aware that his Answer is no advance on the unsatisfactory answer I received later from the noble Baroness, Lady Jay of Paddington? The question is simple. I shall try to put it again. If the Scottish parliament reduces tax by 3p in the pound, the take by the Inland Revenue from Scottish taxpayers will be £450 million less. To make up that deficit will the Exchequer impose additional tax on English taxpayers or will it reduce the Scottish block grant under the Barnett formula by £450 million? It is a simple question. I have waited for 18 years to put it in that way. Will the Government come clean?

Lord Haskel

My Lords, the noble Lord did ask my noble friend Lady Jay that question. Her letter stated: The Government is committed to seeking the endorsement of the Scottish people for the proposal to give the Scottish parliament financial powers to vary revenue. These powers will be defined and limited. The exact mechanisms for this process still have to be finalised, but as you know a clear proposal will be put before Parliament in a White Paper.… In the White Paper we will provide details of the proposed tax varying powers and their implications for spending levels in Scotland".

Lord Marsh

My Lords, may I ask the noble Lord a related question? To what extent will the costs of devolution and the Scottish parliament be borne by Scottish taxpayers?

Lord Haskel

My Lords, devolution will bring real benefits for the people of Scotland and Wales and the costs will be met from within the spending totals approved by Parliament for Scotland and Wales. They will come out of the block grants or revenue raised.

Lord Marsh

My Lords, before the noble Lord sits down, there is a misunderstanding for which I apologise. I am not asking about the block grant. I am merely asking to what extent there will be a charge on Scotland as opposed to England?

Lord Haskel

My Lords, I repeat my reply. The costs will be met from within the spending totals approved by Parliament for Scotland and Wales. Scotland and Wales have their block grants. The costs of the exercise will be met from those funds.

Lord Stoddart of Swindon

My Lords, is my noble friend saying that if the block grant, which is agreed by this UK Parliament, is a given amount and that if the Scots decide to reduce taxation in Scotland by, say, threepence, then that will have no bearing on English taxpayers who will not have to pay additional tax to finance additional spending or reduced taxation in Scotland? That is the question: the English want to know the answer.

Lord Haskel

My Lords, if the Scottish parliament were to vary the tax rate downwards, Westminster would lose a possible £450 million of revenue but could deduct that from Scotland's block grant.

Lord Mackie of Benshie

My Lords, does the noble Lord agree that the noble Lord, Lord Mackay, should know that a decrease in taxation often leads to such a rise in prosperity that revenue goes up?

Lord Haskel

My Lords, I thank the noble Lord for his comments. I agree entirely.

Lord Dixon-Smith

My Lords, is the Minister aware that the only reasonable interpretation of his response to the noble Lord, Lord Marsh, is that the costs of the Scottish parliament or assembly—whatever it is finally called—will be a charge on the taxpayers of the United Kingdom rather than those of Scotland for whose benefit, one assumes, it is to be brought into being? Does he consider that to be a reasonable approach?

Lord Haskel

My Lords, taxation in Scotland is part of an integral UK tax system. We are dealing here with devolution, not with independence.

Lord Swinfen

My Lords, can the Minister—

Baroness Jay of Paddington

My Lords, I believe that we must move on. I am sure that all noble Lords are keen to hear the fate of British fishermen.