HL Deb 06 October 1998 vol 593 cc298-321

(" .—(1) For the purposes of this Part, a person is a Scottish taxpayer in relation to any year of assessment if he is treated for income tax purposes as resident in the United Kingdom for that year and is ordinarily resident in Scotland. (2) In this section, "resident" and "ordinarily resident" have the same meanings as in the Income Tax Acts.").

The noble Lord said: It is 20 years since I moved a major amendment in my name, so I hope noble Lords will assist me to keep on the straight and narrow.

We have already heard many of the arguments that I will raise in my amendment, which is grouped with Amendments Nos. 284 and 285, covering the same subject in Clause 71 "Scottish Taxpayers".

I was grateful to hear the erudite and excellent remarks made by the noble Baroness, Lady Ramsay, at Second Reading, and I look forward to hearing her again. I am delighted to see the noble and learned Lord the Lord Advocate in his place this evening because I should like to refer to his kind remarks as he wound up at Second Reading on 18th June. At column 1786 the noble and learned Lord referred to persons who are liable to pay the Scottish variable tax. The noble and learned Lord said: in practice, nearly two-thirds of tax payers will pay only £145 on average, assuming a full 3p increase. The average liability will be £230. The impact of tax on individuals will therefore not be excessive in any circumstances".—[Official Report, 18/6/98; col. 1786.] The noble and learned Lord was right, and I appreciate the tone of his remarks. The noble Lords, Lord Mackie and Lord Steel, and others in the county of Angus, will know that in rural areas £4 a week might make a small difference to many people like shepherds. All these matters were discussed at length and they were also discussed in the Scottish press and media before the referendum was held.

Being only an accountant, I feel a little like a tightrope walker when attempting to interpret Clause No. 71. That clause deals with Scottish taxpayers. It is logical to start with subsection (1) paragraphs (a) and (b) which define a Scottish taxpayer. Subsection (2) deals with a person who is treated for income tax purposes as resident in the United Kingdom. I shall not go into the Income Tax Act. Paragraph (a) states that he is an individual to whom subsection (3) applies. This is like filling in a passport form, but it is fairly simple. Subsection (3) states that it applies to an individual for a year of assessment if he spends at least a part of that year in Scotland, or for at least a part of the time that he spends in Scotland in that year his principal UK home is located in Scotland. Paragraph (c) concerns the aggregate with this complicated formula. Subsection (4) defines when one is and is not a Scottish taxpayer. It asks the dreaded question of every single United Kingdom taxpayer, not just Scottish taxpayers: "Where were you at midnight?" I shall be corrected if I am wrong, but it is the responsibility of every United Kingdom taxpayer to know, if he has any connection at all with Scotland, where he is at midnight on any one day. I shall not go into whether that includes being on a houseboat. I was intending to tease the noble Baroness, when talking about Scottish protection, by mentioning nuclear submarines, but I shall not do that tonight.

Subsection (4) is very clear and relates to an individual who is in the geographical area of Scotland at midnight and spends the day up to midnight and the day following there.

Subsection (5) deals with residence. I have referred to Clause 71(2) which states that, an individual … has his closest connection with Scotland during that year if, but only if, one or more of the following paragraphs applies in his case". Clause 71(2)(b) provides the test as regards the number of days an individual spends in Scotland. That is the crux of my amendment, which is grouped with Amendments Nos. 284 and 285. This amendment is proposed by the chartered accountants of Scotland. I believe that Amendment No. 284 is proposed by the CBI and Amendment No. 285 by the legal profession.

Clause 71(2)(b) is the linchpin of my amendment. There is an anomaly. The noble Lord, Lord Steel, referred to cross-border workers in the United States. That is one scene with a possible difference. In the United States it would be classified as a federal tax. There would be many state taxes. If the noble Lord wishes, we can debate the issue another day as regards the German system. He can come to our German lessons and discuss it. Clause 71(2)(b), as to whether or not a person is a Scottish taxpayer, provides that he does not have to be resident, or to have a home, but only to be in Scotland at midnight. Those provisions apply to any United Kingdom taxpayer.

This might give some comfort to my noble friend Lord Mackay. I have to assure him that chartered accountants who are considering the proposals in this part of the Bill, and are having to give advice to firms in the United Kingdom, are not entirely of the opinion of my noble neighbour. As other Members of the Committee will explain when they deal with their amendments, the concept in Clause 71 is totally at variance. It introduces new concepts as regards the rules of residence, a point referred to by my noble friend Lord Sanderson.

Perhaps I may refer the Committee to one example. The noble Baroness said that the measure would not affect many people. Some noble Lords may drive either in Scotland or on major trunk routes to Scotland from time to time. The A.1, the A.74 or—one perhaps familiar to the noble Lord, Lord Steel—the A.68 are trunk roads which cross the Border, and are used by large lorries. I have often seen car transporters. The headquarters of a firm which the noble Lord, Lord Mackie, will know well was 200 yards from my gates at Kinnordy in Kirriemuir. The firm moved its headquarters to Dundee. It carries the saltire on many of its trucks. The firm employs 1,000 people around the United Kingdom. Of those 1,000, 360–36 per cent. of the employees—drive those trucks. They travel the length and breadth of Great Britain. They do not go abroad and I shall therefore not go into the European aspect to which my noble friend referred.

Ten days ago the company told me that of those 360 drivers it could identify 26 drivers who would be classified straight away as Scottish taxpayers. In other words, the revenue sends communications to them in Scotland. Approximately 330 of those drivers are non-Scots and residents of the United Kingdom. They will drive those trucks around the United Kingdom and might well be in Scotland. The noble Baroness referred to the measure affecting a handful of individuals. I was advised that 70 of those drivers could be caught by the provisions. The company had no clue about Clause 71, let alone subsection (2) or (2)(b).

I hope that I am right that Clause 71(2)(b) will catch an individual whether he has a home in or is a resident of the UK, or whatever. I was advised that up to 70 of those drivers would have a substantial presence in Scotland and would be likely to be caught by Clause 71(2)(b) as Scottish taxpayers, despite the fact that the only connection they have with Scotland is that they happened to be in Scotland for perhaps two or three nights in a fortnight. If they were to spend two nights in Scotland, let us say Monday and Thursday, that is four days in Scotland as laid down in subsection (4). If they spend 60 to 80 nights in Scotland during a year, and one multiplies the figure by two, that is 160 days in the year.

As I understand the rules laid down by the Inland Revenue, one deducts from one's "residence" in the United Kingdom the time one spends outside the United Kingdom. So if those drivers take a holiday abroad, or in Scotland, they will be spending more than 50 per cent. of the year in Scotland under the provisions of Clause 71(2)(b) and subsection (4).

I wonder whether the noble Baroness who spoke with great eloquence has taken that factor on board. I refer to only one firm which employs 1,000 people. It has given me full details. It has tachographs; and the drivers' hours have to be noted. I confirmed today with the director of human resources that the English or Welsh drivers do not sleep in a bed, but in their cab. The noble Baroness may have fun stating that that is "residence" for the purpose of the Bill.

The provisions of Clause 71(2)(b) have been eloquently laid before us and justified by the noble Baroness. The only connection those individuals have with Scotland is that they spend up to 80 nights in Scotland. I may be known as "squirrel Lyell"; I never throw anything away. When coming to the debate today, I found this document which states: The decision whether or not to use the power to raise additional revenue by the method that we are discussing— should be the [people of Scotland's] decision. This prospect of democratic control contrasts markedly with our experience the last seventeen years during which taxes rejected by Scotland have been imposed on us against our will. The classic example is of course the detested Poll Tax, devised by Michael Forsyth, and others, and introduced in Scotland a full year ahead of England and Wales. If there ever was a 'tartan tax' it was the Poll Tax—the Forsyth Tax". Blue is the colour of my football team, but this document is The Blueprint for Scotland. I believe that those words apply to Clause 71(2)(b) which will affect lorry drivers from the United Kingdom.

At Second Reading, the noble Lord gave a helpful reply. The figures he gave are curiously adjacent to the figures foreseen by tax advisers, chartered accountants and the Law Society as the total sum of Scottish taxpayers. They have given me the authority to say that Clause 71(2)(b) will open up a can of worms. I have referred only to 360 drivers in one firm driving car transporters. What about those vehicles we see being driven up and down the trunk roads delivering food to us?

I have said that it is 20 years since I moved a major amendment. However, have the noble Baroness, the noble and learned Lord the Lord Advocate, and the noble Lord, Lord Sewel, taken Clause 71(2)(b) into account when justifying the provisions with such eloquence? I beg to move.

Baroness Strange

I support my noble friend in the amendment, which is tabled also in my name. I assure the noble Baroness that I shall not speak about rafts, or anything like that, so she should be happy. I say only that the amendment puts forward an easier, more simple clause, as suggested earlier by the noble Lord, Lord Mackie of Benshie.

All Members of the Committee want the new parliament in Scotland to work. That is why we are spending so much time on the Bill. We are fussing with all these amendments because we want to introduce something which will work. We do not want to build in legal complications and have unhappy lorry drivers travelling backwards and forwards in the night.

Clause 71 is enormously complicated and full of traps and pitfalls. I hope that the noble Baroness will consider what has been stated by the chartered accountants, the Law Society and the CBI. We are only their mouthpieces—inadequately, in my case—but we are trying to make the Bill work. I support the amendment.

Lord Selkirk of Douglas

I speak briefly to Amendment No. 285. It has the support not only of the Law Society of Scotland but of the Institute of Chartered Accountants of Scotland and the Scottish CBI. Therefore, there is a strong basis of support for the amendment from a wide range of bodies which have an undoubted expertise in dealing with such matters.

The Committee has already heard the case for subsections (1) and (2). I support the arguments put forward by my noble friends, in particular my noble friend Lord Lyell who so ably argued the case of the lorry driver who will be caught by the midnight provisions if he travels to Scotland every week. As the Bill focuses on midnight, someone living in Carlisle who crosses the Border at 8 a.m. and returns at 6 p.m. does not fall within its ambit, although he or she may have a more substantial connection with Scotland than a lorry driver.

I contend that the provisions put forward in Amendment No. 285 are a more certain test than that in the Bill. It relies on residency in the UK and closest connection with Scotland. It is also a more satisfactory test in the sense that it could be more readily established. The present provisions try to cope with the position of the Scot who maintains a home and family in Scotland but commutes to England on a Monday morning and returns to Scotland on Friday evening. Unless one counts the weekend as four days in Scotland, that person would escape the taxation provisions. The question is: which approach might do more economic harm; a narrow tax base which allows some to escape undeservedly or a wider area which will catch others undeservedly?

The better and more professional approach would be to exempt those who travel to Scotland in the course of work, whether employed or self-employed, unless they are in Scotland for 183 days. For this purpose, a day would count only if one were in Scotland at the start and the end of it. I commend the amendment on the basis of certainty and clarity. The practitioners most directly involved with the subject give it strong support.

Lord Rowallan

I am deeply concerned about Clause 71. It is illogical to introduce a new definition of what is resident in Scotland. The noble Lord, Lord Mackie of Benshie, put the matter succinctly in saying that perfectly good laws already exist which define people as being abroad or at home. Why are we seeking unnecessarily to have a set of totally new rules?

It is interesting that the chartered accountants, the CBI and the Law Society believe that the clause is rather stupid. I can see no reason for changing the 183-day rule. I should like to hear from the Minister one single solitary reason why he believes it is a good idea.

Lord Saltoun of Abernethy

Everything I have read about Part IV, and Clause 71 in particular, and everything I have heard about it so far makes me realise that it is a total pig's breakfast which will lead to nothing but litigation and confusion. I can only implore the Government to take this part away and to think about it and try to redraft it between now and Report.

6.15 p.m.

Lord Stewartby

I hope that the Minister will take on board the comments that have been made in Committee tonight and those which have come from quarters outside. The heart of the problem lies in subsection (4) and the asymmetrical nature of what residence in England and Scotland means. As my noble friend Lord Lyell said in opening, the provision could affect a number of those who are temporarily in Scotland. As my noble kinsman Lord Selkirk point out, the weekend definition must have double counting, otherwise it does not offset the part of the week which a person might spend in England.

The simple mathematics are that if one spends 92 nights in Scotland in a year one is deemed to be resident for this purpose in Scotland and not elsewhere in the United Kingdom. That is asymmetrical. It will catch many people who may spend nine months in England and Wales and only three months in Scotland. I do not believe that such an artificial distinction which tilts the ordinary equitable definition of residence will be enforceable. What is more, I doubt whether it will be sustainable in law. I suggest that the Government think seriously about it.

Lord Steel of Aikwood

As my noble friend Lord Mackie hinted earlier, we on these Benches are sympathetic to attempts to redraft the clause before us. In my view, each of the three amendments is more succinct and clearer than the provision in the Bill. I do not know whether it is a pig's breakfast or a dog's dinner, but it is unnecessarily complex. We in this House, as a revising Chamber, ought to be aiming for simplicity in legislation, provided that simplicity brings clarity. We will listen to what the Minister has to say, but we are sympathetic to the amendments.

Lord Milverton

As an Englishman, I have been interested to hear what has been said. I agree that it is a strange way to deal with the residency issue. It would be good if the Government and the Minister could take on board what has been said by Scottish Peers and try to respond in a helpful way.

Lord Simon of Glaisdale

It requires an apology on my part for intervening in this debate. I do so because I have been concerned in more than one capacity with the revenue law. Our revenue law is extremely complicated, far more so than the codes of the United States and the Commonwealth. A high-powered committee, with the blessing of the Government, is considering a way of restating the law in more simple terms. It is purely to restate the present law in a more intelligible way. But there is a vice in our revenue law in that we try to cover particular cases too precisely. We do so much more than most other comparable codes.

Clause 71 does not add anything to the simplicity of the preceding existing law. The proposed restatement in these three amendments are an improvement and should be acceptable. If I had to choose between them I would choose Amendment No. 283 because it is the most simple and covers everything that the Government needs.

I hope that whoever replies to this debate will desirably accept that amendment. At the very least they should undertake to consider this matter further in view of the arguments which have been put forward.

Lord Mackay of Ardbrecknish

Amendment No. 284 is in my name and that of my noble friend Lord Rowallen. I am delighted and relieved to find myself in total agreement with the noble and learned Lord, Lord Simon of Glaisdale. I am delighted because occasionally in a previous existence I found myself having to argue with him. I can tell the Ministers that it was not an easy experience and that usually the noble and learned Lord, Lord Simon, had more than a point in the arguments he brought forward. Government Ministers should listen to him.

I will not rehearse the argument to any great extent. We have had the argument in this debate and in the debates leading up to it. I know that the Government were beginning to lose patience with these arguments, but I put them forward deliberately in order to illustrate to the Committee the complexities of this clause.

The noble Lord, Lord Mackie, came to my support when he said that there is a perfectly good system already. Why do we not just use it? "What are you bothered about?" he said to me. I paraphrase the noble Lord, but what I am bothered about is that we will not be using the system.

Lord Mackie of Benshie

I did say that it was a perfectly good system. What I inferred was that the present clause could not damage it much.

Lord Mackay of Ardbrecknish

The noble Lord, having heard much of the debate since, might agree that perhaps it is not a good system in Clause 71 and 72. Certainly that is what his noble friend Lord Steel of Aikwood suggested. I am happy to say that I find myself in agreement with the noble Lord, Lord Steel of Aikwood, on this one.

These three amendments are all similar. The noble and learned Lord, Lord Simon of Glaisdale, picks the one that is shortest. I am not surprised at him at doing that because he is a great advocate of not only clear but short legislation.

The history of the amendments is that Amendment No. 283 emerged from the accountants in Scotland, Amendment No. 284 came from the CBI and Amendment No. 285 came from the CBI, and then from a combination of all three organisations. All three organisations now think that the clause in the name of my noble friend Lord Selkirk of Douglas is the one that encompasses all their concerns.

When we debated Amendment No. 279C, the Minister made a great virtue of the fact that the particular part that we were debating had been inserted in the Bill after discussion with the Scottish financial community who wanted this kind of provision. Here we have a provision in the Bill which is wanted by the CBI, by the accountants and by the Law Society. The Government should take their own words to heart and think carefully about this.

This simply takes on board the definitions already well entrenched in UK tax legislation, well entrenched in case law and well understood by the people who have to work the system about who are residents and where they are resident. If the Government could take this on board, take these amendments or one of them—perhaps Amendment No. 285, or even Amendment No. 283, as the noble and learned Lord, Lord Simon of Glaisdale, suggested—we would be delighted.

The definitions in this Bill are a real nightmare. Without doubt this is the most complicated part of the Bill. The Government would be well advised to think again about proceeding in the way that they intend. I cannot speak for my noble friends but what would allow me to withdraw my amendment is if the Government promise to have discussions with these three leading organisations in the field in Scotland. They could then come back to us on Report with their proposals on the way forward and remove these complex clauses which do nothing to help the legislation. If they could do that and go for the simpler and well-honed definitions of residence which are contained in current legislation we would all be mightily relieved. The system would then work far better for the Scottish parliament. A lot of unnecessary argument would be prevented and the position would be much better. The Government would have been shown to have listened.

I regret that one of the features of this Committee stage—and this is the ninth day—is that the Government do not listen. I have long since decided that they are not going to listen to me, but can they not listen to the CBI, the Law Society of Scotland and the Institute of Chartered Accountants? If they cannot listen to me, will they listen to them? I commend these amendments to the Government. Perhaps they can give some indication that they will accept one of the amendments, or at least discuss with these outside bodies and come back on Report. I cannot speak for my noble friends but I give the Government notice that if they do not the House will be asked to test one of these amendments in a very serious way in the Division Lobbies on Report.

Lord Sewel

Let us look at Amendments Nos. 283, 284 and 285. They all have in common the fact that they seek to replace the definition in Clause 71 of a Scottish tax payer. In a way they all build one upon the other, starting with the amendment in the name of the noble Lord, Lord Lyell. It is the common building block of all the amendments because it seeks to restrict liability to the Scottish variable tax to people who are ordinarily resident in Scotland.

Amendment No. 284 widens the definition slightly by building back in the existing provision in Clause 71 Scottish MPs, MEPs and MSPs, who would be Scottish tax payers. Amendment No. 285 widens the definition further by including people in Scotland for a temporary purpose who spend more than six months there in any year.

One of the difficulties is that the amendments are not correct in ascribing existing statutory definitions to the terms "resident" and "ordinarily resident". These terms are not defined in the Income Tax Acts.

Lord Simon of Glaisdale

Is the noble Lord sure about that? My recollection—admittedly somewhat rusty—is that those phrases have been clearly interpreted by the courts that "resident" and "ordinarily resident" mean the same thing. They are both used in the Income Tax Acts and can be well accepted.

Lord Sewel

I thought I was on the thinnest of all possible ice for some time. The noble and learned Lord said in his intervention what I was going to say in my subsequent sentence. They are not defined in the Acts but have been defined through the courts. There is no point of disagreement between us

It is worth going back to say that we have tried to define a Scottish tax payer, in the following ways, in Clause 71. An individual is deemed to be a Scottish tax payer for a given year under the following conditions. First, an individual must be a UK resident for tax purposes in the year in question. So we are talking only about UK residence. That is an absolute requirement. If that test is met, there are three ways to qualify. One way of qualifying is that the principal home is in Scotland. Another way of qualifying is that more than half the number of days spent in the UK are spent in Scotland. The third is that one is a Member of Parliament—Scottish, UK or European—for a Scottish constituency. A person who meets one or more of those tests will be regarded as a Scottish taxpayer.

Noble Lords have argued forcefully that the proposed alternative test for defining Scottish taxpayers is more straightforward and should be easy to apply in practice because it relies on familiar concepts. We have considered that approach. It was the obvious one to consider—we have not gone down this road with any sense of perversity. We looked at that as the possible solution to the difficulty of defining a Scottish taxpayer, and of course we had discussions with the Inland Revenue. I take the point made by the noble Lord, Lord Mackie of Benshie, that the Inland Revenue has expertise in dealing with these matters. It is because of those discussions that we have come up with the clauses in the Bill.

The difficulty that we faced was that the case law that had been developed in terms of resident and ordinarily resident could not be simply translated to a rather different situation of movement within the United Kingdom where that case law had been developed very much in the context of international movement, not least because the level of cross-border traffic between Scotland and the rest of the United Kingdom is much greater than it is in an international context. Furthermore, it is far more common to move home within the United Kingdom. We were drawn to the conclusion that we must have rules which work for persons who spend a lot of time in both Scotland and the rest of the United Kingdom and persons who move home from, say, Scotland to England. That is what we have attempted to do in laying down these tests.

Although residence is an appropriate qualification for tax liability, it is not in itself a sufficient one because it is proper, particularly in this context, to have something which captures those who spend a great deal of time in Scotland without technically residing there. Indeed, Amendment No. 285 attempts to deal with that by introducing the concept of temporary purpose. However, I think that the introduction of that concept would be enormously difficult to define.

I think that we are broadly correct in the approach we are taking. However, I have listened to what noble Lords have said and I take on board the concern that has been expressed about the 92 nights situation whereby someone can become a Scottish tax payer on the basis of spending 92 nights in Scotland. That would arise only if none of those 92 nights was consecutive. If I may almost argue against myself, if we arrived at a system of regional government in England and those regional authorities had variable tax rates, it would be at least theoretically possible to pay three different variable tax rates. That would take some degree of argument and justification.

I have listened to what has been said. I think that our broad approach remains correct. I do not think it is possible just to apply the working concepts of resident and ordinarily resident. I wish to go away and look at the definition that produces the 92 day cut-off. Perhaps we could consider wording that part of Clause 71(4)(a) differently so that we remove what I think are the words that cause the problem—"the beginning or end of the day"—and come up with a different formulation. I will then come back to your Lordships' House at Report stage.

6.30 p.m.

Lord Mackay of Ardbrecknish

Before I decide what to do with my amendment—perhaps my noble friends will be of the same mind—I wonder whether I could invite the Minister to indicate that, if they wished to do so, he would be happy to have a meeting with the CBI, the Institute of Chartered Accountants and the Law Society of Scotland in order to discuss these matters. They have attempted to discuss these matters with the Chancellor of the Exchequer. I have before me a letter which the CBI received back from the Chancellor. It is dated 1st October. The CBI had written on 28th July. It took the Treasury two months to reply. Frankly, it could have replied the next day because it did not argue. The Chancellor simply said that he was not persuaded that the suggestions from the CBI would achieve a better result.

The CBI was not in the least persuaded by the Chancellor because he did not argue his case. He just made the bland assessment that the Government had thought about it, the Government are right, and that is it. I recognise such a letter. I probably signed a few of them in my time. It is not a very adequate answer. I did not think so even when I was signing such responses. I wonder whether the Minister could give an assurance that if these organisations, either together or individually, would like to discuss these matters with the Government before Report stage, the Government would be willing to do so.

Lord Sewel

There have been discussions with the three organisations on this very point. But I am more than happy, and I am sure my colleagues will be more than happy, to meet them again and try to resolve this issue.

Lord Lyell

I was a little mystified, because I thought we were getting close together, by the Minister saying, "We want to catch people". That is at variance with what was said by the noble and learned Lord the Lord Advocate at Second Reading. The United Kingdom Inland Revenue has a good idea of the number of people to whom Clause 71 should apply. Indeed, the figures quoted by the noble and learned Lord were very close to the figures quoted to me by the chartered accountants. It was in that spirit that I was very encouraged. But I am very encouraged by what the Minister has said. I have copies of correspondence from the president of the Institute of Chartered Accountants of Scotland expressing gratitude to Mr. McLeish, the Minister of State, for his helpful attitude in trying to resolve this difficulty.

I return to Clause 71(2)(b). The Minister made an eloquent comment about residence and was backed by the noble and learned Lord, Lord Simon of Glaisdale. The existing concept of residence seems to tally with what the noble and learned Lord said at Second Reading. Clause 71(2)(b) might extend a little wider and might cause unnecessary concern among non-Scottish taxpayers. At no time during the referendum campaign or in your Lordships' House did the Government intend, to quote the Minister's words, to catch them. I do not think they intended to do that. It is with that in mind that I ask leave to withdraw Amendment No. 283.

Amendment, by leave, withdrawn.

[Amendments Nos. 284 and 285 not moved.]

Clause 71 agreed to.

Clause 72 [Changes to income tax structure]:

The Earl of Balfour moved Amendment No. 286:

Page 33, line 13, leave out ("or the Board").

The noble Earl said: At this stage of the proceedings on this Bill, we find reference to "the Board". This amendment is a purely probing amendment, to give me an opportunity to see whether it is possible to find out who or what is "the Board". Although I have searched for it all the way through this Bill, I have found no definition whatever.

But I notice that Amendment No. 286 is grouped also with Amendment No. 293. I sought the best possible advice from our wonderful staff in the Public Bill Office and they suggested that "the Board" could mean the Commissioners of Inland Revenue. I may be right; I may be wrong. However, as the Bill stands, I have not a clue as to who or what "the Board" is. I beg to move.

Baroness Ramsay of Cartvale

Clause 72 sets out the action the Treasury would have to take if it appeared that the tax-varying power was going to be significantly affected by published or forthcoming changes to the UK income tax system. Such changes could be made or published in a variety of ways, and it is necessary for the Bill to recognise this.

Changes to the income tax code may be first published by Treasury or Inland Revenue. They are often, of course, announced by the Chancellor in his Budget. Clause 72 as currently drafted explicitly covers all of these possibilities.

If Amendment No. 286 were accepted, doubts could arise as to the point at which Clause 72 is triggered by satisfying the condition on subsection (1)(b), or there may be doubt as to whether the clause is triggered at all. At the very least it could introduce delay into the process of considering revised tax arrangements for Scotland. There would be no purpose to that delay. There is no question of lack of proper parliamentary scrutiny since any change to the arrangements already provided in Clause 69 of this Bill would need to be the subject of primary legislation by the UK Parliament.

I turn to Amendment No. 293. Section 832(1) of the Income and Corporation Taxes Act 1988 defines "the Board" for the purposes of all enactments relating to income tax as "the Commissioners of Inland Revenue". As Part IV of the Scotland Bill, if enacted, will form part of the Income Tax Acts, there is no need to define the term specifically in the Scotland Bill, in much the same sense that if the term appeared in an income tax provision in a Finance Bill, there would be no need to define the term in that Bill.

In the light of those explanations which I hope satisfy the very understandable points of query raised by the noble Earl, I hope that he will feel able to withdraw the amendment.

The Earl of Balfour

I am most grateful to the noble Baroness for her reply. I believe that each Bill, which of course becomes an Act of Parliament, should stand on its own and not leave the ordinary person reading legislation wondering, just as I had to wonder, what is "the Board". In that respect, I rather wish that the noble Baroness, Lady Ramsay, would think again between now and Report, because I believe that we must never leave the ordinary citizen in doubt. Otherwise, I am grateful to the noble Baroness for what she has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.45 p.m.

Lord Mackay of Ardbrecknish moved Amendment No. 286ZA:

Page 33, line 14, leave out from ("or") to ("a") in line 15 and insert ("is").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 286ZB and 286ZC. Clause 72 relates to changes in the income tax structure. I now understand more clearly what is behind this part of the Bill than I did at the beginning of today. If I understand an exchange we had earlier—and I am repeating it because I was not entirely sure if my question was clear to the Minister when he answered it and at least one other of my noble friends thought the same—when we deal with this 3p or £420 million, the question of finding some other way to raise the money will be triggered only if the changes which mean that 3p does not raise £420 million are because of changes in the tax structure of the United Kingdom. If, because of economic changes—when perhaps the number of basic rate taxpayers has declined because of an economic downturn—the 3p raises only £350 million or £400 million, so be it, the Scottish Parliament is stuck with that. The nods from the Government Front Bench tell me that I have that right. It is only if there are structural changes which result in the 3p not raising £420 million that Clause 72 will be triggered.

I have tabled three amendments which are probing. They are of the "What does it mean?" variety. I understand Clause 72(1)(b) which states that proposal is one made and published by the Treasury or the Board, or … appears to the Treasury to be a proposal to which effect is likely to be given by Act of Parliament". However, I do not understand the expression, without having been so made and published", which is in brackets. If the proposal has not been made or published, how the devil can the Treasury make any decision about what it is? Therefore, why does the subsection include the words, without having been so made and published"? If the proposal has not been made or published, it does not seem to me that there is a problem. Why are those words there?

Amendment No. 286ZB removes the words "it appears to the Treasury". Why are those words there and why is it only the Treasury? What will happen if the Treasury considers that the changes will not affect the Scottish rate or it will not be by a significant amount but only £10 million or £20 million so that it will not do anything about it? Will the Scottish parliament have absolutely no say and no one to appeal to? Will there be no one to adjudicate on any dispute between the Scottish parliament and the Treasury? Perhaps the judiciary will be called into play to resolve any dispute in relation to such matters. Is it just the Treasury which is to make those decisions?

It is dangerous to leave the Bill in that way because I can see that in the future the Treasury may decide, "Given the bother that we shall have to go to to raise another £30 million or £40 million, we do not think that is significant so we shall not try". Anybody who has had dealings with the Treasury knows that when the Treasury digs in its heels, its heels get dug in fairly deeply. It is not right that we should leave the matter just to the Treasury.

Amendment No. 286ZC takes out what seem to me to be unnecessary words. If they are not unnecessary, they certainly put the Treasury in the driving seat to a far greater extent than I believe should be done. We are entering a phase where we will have another parliament and government in the United Kingdom quite separate and distinct from the United Kingdom one. Indeed, during the Recess I heard the Secretary of State for Scotland actually using the word "independent". I felt it was a dangerous word to use because it has other meanings; but on certain issues, to all intents and purposes it will be an independent parliament.

It is an important matter of finance. If the parliament decides to use these tax raising powers, we should not be put in a position where the Treasury remains entirely in the driving seat when it comes to disputes surrounding the implementation of any part of Clause 72.

I hope that the noble Baroness who is to reply will be able to reassure me and explain what the words mean that I desire to be removed from the Bill. I hope that she can persuade me that they should remain in the Bill; that they have meaning and substance. If not, I suggest that she agrees with my amendment and we remove the unnecessary words. I beg to move.

Baroness Ramsay of Cartvale

I understand and appreciate the motivation behind these amendments now that they have been explained to me by the noble Lord, Lord Mackay of Ardbrecknish. I understand also some of his doubts and the reason he moved this probing amendment. I hope to be able to explain exactly what is behind the point of his concern.

When any change is proposed in income tax provision, Clause 72 requires that the Treasury judge its likely effect on the Scottish parliament's tax-varying power. Where it believes the effect will be significant under Clause 72 the Treasury must make proposals—I emphasise that word—for a replacement tax power.

I have no difficulty with the proposed Treasury role in such circumstances. It is the Treasury (and no one else) who will know in advance the big picture on any major UK tax changes that could affect the Scottish tax power and as guardian of the UK tax system (of which the Scottish power will be a part) it is appropriate that it should be charged with making proposals for any changes. But its role will be limited to one of proposal. It will ultimately be for the UK Parliament to decide upon those proposals. There is of course nothing to prevent the Scottish parliament arguing the case for change with the Treasury at any time.

But the key purpose of these provisions is to ensure that the Scottish dimension is taken fully into account when major UK tax changes are in prospect and that things are put in motion quickly to ensure that appropriate changes are made.

The noble Lord, Lord Mackay of Ardbrecknish, asked specifically what is meant by the words, without having been so made or published". I am advised that the reason those words were inserted was to deal with a situation, for example, when an Opposition amendment may be proposed to the Finance Bill when it would not have been "so made or published". I understand that has happened in the past.

The other point I make is that, in some circumstances, time could be of the essence; for example, when a revised tax power is to be available for the Scottish parliament in time for a new tax year following UK tax changes. In that regard the Treasury role could be vital in arranging things quickly.

I hope those explanations go some way to explain why the provisions are phrased as they are and that I have gone some way to answer the noble Lord's points and queries. If so, I trust that he will withdraw his amendment.

Lord Mackay of Ardbrecknish

I am grateful to the noble Baroness. I am intrigued that the Opposition may make changes to the Finance Bill which may change the basic structure of income tax and might even manage to win. That envisages a slightly different House of Commons to the one that we have. However, I see the point.

I do not believe the noble Baroness fully addressed my concerns. What if the Scottish parliament decides that it is not happy with the Revenue's proposals or lack of proposals and feels, for example, that the Revenue is describing as "not significant" a sum of money which, in its view, is significant? Will it simply be a matter of horse trading between the Government in London and the government in Edinburgh to try to resolve it, or is there some way in which an arbitrator—the courts or whoever—can be brought into play in order to decide the issue?

That is the only remaining point which the noble Baroness did not answer to my satisfaction. If she can do that, I shall withdraw my amendment.

Baroness Ramsay of Cartvale

The only point I can make is that, at the end of the day it will be the UK Parliament's prerogative. I hope that that answer is adequate.

Lord Mackay of Ardbrecknish: As a Unionist, that is a perfectly adequate answer. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 286ZB and 286ZC not moved.]

Lord Mackay of Ardbrecknish moved Amendment No. 286ZD:

Page 33, line 31, after ("to") insert ("the basic rate of").

The noble Lord said: This is a simple amendment with a simple intention. We are still talking about changes that the Treasury may decide to make because of structural changes to the tax system.

The Bill as it stands must be confined to income tax. I appreciate that. I should like it to be confined to the "basic rate" of income tax. After all, those Members of the Committee who have been here all afternoon will have gathered that it is the basic rate about which we are talking when we discuss the plus or minus 3p. My mind may perhaps be oversuspicious, but I wonder why all of a sudden the basic rate has been dropped when it comes to this specific part of the clause. The amendment suggests the insertion of the words "the basic rate of", which would make it consistent with what we have discussed from Clause 69 onwards; that is, the basic rate.

If the Government decline to accept my amendment, it will be clear that in the circumstances we are discussing, of the Treasury having to make proposals, they will be able to make proposals affecting other rates of income tax—either the 20p or higher rates. That is clearly the only conclusion that can be drawn from subsection (3)(a) as it stands. Unless we insert the words "the basic rate of", it is not clear that we will be dealing with the basic rate. The Treasury may decide to make the amount 4p, for example, if there was a shortfall. That would be one way out. Equally, it may decide that the only way to get round it is to impose a Scottish variable rate on one of the other bands of tax. We can argue about that, but we ought to be clear about it.

Subsection (3)(a) clearly indicates to me that, in the circumstances we are discussing when Clause 72 is brought into play, the Treasury might propose to add a Scottish tax to either the 20p rate or the 40p rate. If that is not the Government's intention, I suggest that they accept my amendment. I beg to move.

Baroness Ramsay of Cartvale

I understand that, by this amendment, the noble Lord intends to ensure that any replacement tax power affects broadly the same group of Scottish taxpayers as the existing proposed power. We agree entirely with that principle and have already provided for that by Clause 72(5).

The real point is that we cannot know what changes may be made to the income tax structure in the future. It may be radically rewritten and there may no longer be a basic rate band. In that situation this amendment would create chaos. I understand that that is not what the noble Lord intends; I understand his intentions as he explained them. The reason behind leaving out the reference to the basic tax band in this part of the Bill is because there might well be no basic rate tax band at some point. That is why we have let it go on this part of the Bill. With that explanation I hope that the noble Lord will agree to withdraw his amendment.

7 p.m.

Lord Mackay of Ardbrecknish

I am grateful to the noble Baroness. While the circumstances that we are discussing are pretty hypothetical, I can see her point that at some stage in the future the tax system may be changed in a way that there is no longer something which can be called the basic rate of income tax. Consequently, the way in which Clause 72 is drafted would be appropriate. Therefore, I presume that as long as there is a basic rate of income tax the restriction will apply. It is only if there is no basic rate of income tax that it can be widened to other taxes. I shall require more than a nod of assent from the Government Front Bench. I would like the Minister to intervene.

Baroness Ramsay of Cartvale

I can confirm that. I am even prepared to write to the noble Lord if he so wishes.

Lord Mackay of Ardbrecknish

While I would love a letter from the noble Baroness, it is not necessary. I have had her assurance from the Dispatch Box, which carries a good deal more weight as regards the future than a letter. I am content to withdraw my amendment.

Amendment, by leave, withdrawn.

Lord Mackay of Ardbrecknish moved Amendment No. 286A:

Page 33, line 36, at end insert (", and (d) shall be contained in a statutory instrument which shall be subject to approval by resolution of the House of Commons").

The noble Lord said: This amendment refers to any proposal to make tax-varying amendments or tax-varying powers by secondary legislation. It follows on from what we were discussing about certain circumstances which may arise under Clause 72. The Treasury has made suggestions for changes and how they are to be dealt with by Parliament. I am disturbed by a power to amend the tax-varying powers by secondary legislation especially as so much time was spent here and in the other place discussing them. Those tax-varying powers were endorsed last September in a referendum, as I am constantly reminded, by the Scottish people.

I considered striking all this out of the Bill to ensure that any changes to the referendum pledges could be made only by primary legislation, but I decided not to go that far, especially as I believe that I have offered the Government an easy way out of this problem. However, I believe that any proposals to amend the parliament's tax-varying powers should be subjected to the strongest possible parliamentary scrutiny short of primary legislation.

My amendment makes clear that any such proposal will need the affirmative order procedure. I accept that this matter ought to be placed in Clause 102, but by putting it where it is now I believe that we shall have the debate in the correct place. If the Minister tells me that she accepts in principle the point that I am making and will make the amendment later on, I shall be content. The whole of Clause 102 has now been re-written by the Government. I have not yet had time to study it. I shall be even more delighted if the Minister tells me that in the re-write I shall find that my wishes have been agreed by the Government.

I am not very happy with the way in which the Government have brought forward at this Committee stage these amendments to the procedures for secondary legislation. From my understanding of the copy letter that I had from the noble Lord, Lord Alexander of Weedon, these matters were to be dealt with at Report stage, which would give us some time to consider them. This very considerable re-write now has to be considered by us—and amended if we want to—today while we are still in Committee on an earlier part of the Bill. In my view it was clear in the letter to my noble friend Lord Alexander of Weedon that these matters were for Report stage. I am puzzled as to why they suddenly appear on the Marshalled List for Committee stage.

Amendment No. 286BA is very simple. The sum of £420 million which we have discussed a few times is to be inflated by the retail price index. We are talking about Government expenditure. It would be more accurate if the figure was changed by the applied deflator for general government final consumption. I recommend that to the Government as a more accurate way of dealing with the £420 million over the course of the years to come.

Amendment No. 287C removes the possibility that the Treasury may make an order retrospectively if it considers it appropriate. Why do the Government believe that the Treasury may need this discretion and retrospective power? Could it be used by the Treasury to negate a resolution of the Scottish parliament. If the parliament does something, can the Treasury use that power to negate it if it does not like it? If my fears are correct, that could cause a clash between Westminster and Edinburgh, which none of us want to see.

Referring to Amendment No. 287D, I am really puzzled. Surely the Government mean to refer to changing any enactments already on the statute book drafted and passed before by the Scottish parliament was conceived. Any enactment from now on will surely take into consideration the existence of the Scottish parliament and should not need any subsequent changes to take account of the Scottish parliament. I wonder why these words are in the Bill in this rather convoluted way. If the noble Baroness can explain, I shall be very interested to hear it. I beg to move.

Lord Mackie of Benshie

Perhaps the noble Lord, Lord Mackay of Ardbrecknish, can explain why he needs Amendment No. 286A. Clause 72(3) begins, Any proposals for amending the Parliament's tax-varying powers that arc laid before the House of Commons by the Treasury". Surely those provisions have to be in a statutory instrument laid before the House.

Lord Mackay of Ardbrecknish

I believe I am right in saying that many things are laid before the House of Commons which are not statutory instruments. There is a difference. I invite the noble Lord, Lord Mackie of Benshie, to look at the Order Paper. He will see that there are things laid before this House which are not statutory instruments. There are usually lines and lines of them on the Order Paper. That is why I have put the matter in the way that I have.

Baroness Carnegy of Lour

I hope that the noble Baroness is going to look seriously at Amendment No. 286A, if my noble friend is right and the noble Lord, Lord Mackie of Benshie is not correct. When people voted in the referendum for the tax-raising powers they certainly had no idea that the arrangements for those powers, and the level of the amount of tax to be raised, might be decided in the House of Commons. I do not think that people realised that. It could be a source of enormous friction. It may look alright to the Government now. They visualise dominating the Scottish parliament and also Westminster. No doubt that cannot go forever: they may not even last very long. It is therefore important that this matter should be formalised and that there should be proper discussions and a vote. That is the way it should be done.

Lord Mackay of Ardbrecknish

The noble Baroness may be very worried. I believe that inadvertently I have confused Amendments Nos. 286D and 287D. I apologise for that. Given the state of the Marshalled List I think I can plead for forgiveness. We shall come to Amendment No. 287D later. I wonder why I put it in this group. I should have spoken to Amendment No. 286D and I shall leave Amendment No. 287D for a later time.

Amendment No. 286D is about Clause 72(5), which is an astonishing subsection. It states, The second condition so mentioned is that the proposals would not enable the Parliament's tax-varying powers to be exercised for any year of assessment so as to have an effect on the levels of the after-tax income of Scottish taxpayers generally that would be significantly different from the effect their exercise could have had in any previous year of assessment". When I read it, my reaction was, "Sorry, say that again." If that means that the after-tax income will be changed very much, you cannot do that, so I ask myself why they have been given the power to do it at all. If taxes can be increased by up to 3p in the pound, that will affect the after-tax income. That is inevitable.

What does that amazing subsection in Clause 72 mean? If it means that the other taxes (which the Treasury has suggested might take the place of that 3p in the pound) may impinge heavily on Scottish taxpayers, that cannot be allowed. I do not understand how they can impinge more heavily on Scottish taxpayers than would a tax of 3p in the pound if both are to raise £420 million. Perhaps the noble Baroness could explain what that means. I apologise to her for probably giving her a slight flutter of the heart because she might have wondered which amendments I was talking about.

7.15 p.m.

Baroness Ramsay of Cartvale

I shall endeavour to explain. Yes, that did cause me some consternation and my noble and learned friend the Lord Advocate will deal later with some of the points that were raised, to my horror, a few minutes ago.

This whole subject is, of course, a very complex business. I shall try to put our points as clearly as I can and allay some of the fears or apprehensions that might have been aroused by a lack of understanding about what lies behind some of the provisions.

Amendments Nos. 286A, 286C, 286D and 286BA concern the proposals for an alternative tax-varying power which the Treasury, as we have already discussed, is required to make in the event that changes to the UK income tax system would have a significant effect on the tax-varying power. That sets the scene.

Amendment No. 286A would require that the proposals be presented in the form of a statutory instrument, which would be subject to an affirmative resolution. I assume that this amendment is prompted by a very proper desire to ensure proper parliamentary scrutiny of any changes. Indeed, the noble Lord, Lord Mackay, confirmed that. But Clause 72 sets out only the parameters which the Treasury might follow in drawing up proposals. Any change in the tax-varying power would require a change in primary legislation, most likely through provisions made in the annual Finance Bill. The use of a statutory instrument would leave changes to the tax-varying power subject to less, not more, parliamentary scrutiny than we intend and believe is embodied in the Bill as it stands. In any case, the proposal provided for in this clause would not be a suitable instrument for making such a statutory change.

Amendments Nos. 286B, 286BA, 286C and 286D are concerned with the parameters for the replacement power. The key point is that, as it stands, Clause 72, just like Clause 69, is based around the tax rate—the maximum 3p variation—rather than the tax product. As I hope that I explained in our debate on Amendment No. 279A, this must be the correct approach if we are to avoid the situation of fewer people having to pay more tax.

The figure of £450 million, which appeared in the White Paper, was a preliminary estimate of the maximum amount which could have been raised or forgone under the proposed tax power, had this provision been in operation in 1997–98. It was right that we included it in the White Paper because it allowed people to see the order of magnitude of the revenue generated or forgone by a 3p rate variation. The White Paper made it very clear that that was just an estimate, albeit that it looks likely to be quite an accurate one.

The key point is that it would be inappropriate to tie the product of any future power to any fixed figure, whether it was a preliminary estimate or any other figure. The correct approach is to concentrate upon the tax rate—the amount which people will have to pay. This approach will ensure continuity for taxpayers (ensuring that their individual tax liability does not change dramatically as a result of any new power); and it will actually deliver year on year continuity of the tax product more effectively in this context than the setting of a fixed product. A fixed product—whether £450 million or whatever—may differ significantly from the actual product of the previous tax year if the tax base had shifted over the years, upwards or downwards, and this could mean a significant discontinuity between years. Incidentally, the £450 million suggested in Amendment No. 286C could also be very different from the "guaranteed additional revenue" figure, which was proposed in Amendment No. 281BA. We think that Amendment No. 286C is fundamentally misguided.

I appreciate, of course, that Amendment No. 286BA falls naturally out of the approach being proposed by the noble Lords opposite. If one concentrates on tax product, the GDP deflator would be the correct indexation approach. However if, as we propose, we concentrate on the tax rate and the effect upon individual taxpayers, the RPI, which is the main measure of inflation as it affects taxpayers, is the appropriate mechanism for indexation.

Turning to Amendment No. 286D, Clause 72(5), which the noble Lord, Lord Mackay of Ardbrecknish, said was pretty difficult to get one's mind around—he did not put it quite like that, but that is certainly what I feel about it, and about certain other clauses—requires that any proposed replacement power has a similar impact on individual taxpayers to the existing power. This is to ensure continuity with any future replacement power. It would prevent, for example, the extension of the replacement power to those who pay income tax only at the lower rate; or any major concentration of the tax burden in future on a particular income group. I am sure that it is not the noble Lord's intention to encourage proposals for any replacement power which would have an undue impact on any group of Scottish taxpayers, but we think that that would be the unfortunate consequence of the amendment.

The noble Lord referred to the point about subordinate legislation being made in Committee rather than on Report. I am advised that it was always intended to table these amendments in Committee and not on Report. I am also advised that there was an error in the layout of the annexe to the letter to which the noble Lord referred, which may have caused some confusion. As I was not aware of that, I can only apologise to the noble Lord for that and for any confusion that was caused. I hope that in the light of all these explanations the noble Lord may feel able to withdraw the amendment.

Lord Mackay of Ardbrecknish

I do not blame the noble Baroness for the confusion, but perhaps she can help me in this regard. If the letter has gone to my noble friend Lord Alexander of Weedon and the Select Committee on Delegated Powers and Deregulation and if it has told them that these amendments will be tabled on Report, I presume that they will be working to report to the Committee before Report. We shall now have to discuss the amendments on Thursday. Is there any possibility that the Select Committee will be able to consider those matters before our next Committee, on Thursday? If not, it seems to me that the error in the letter to my noble friend is a serious mistake by the Government. Although I do not expect the noble Baroness to answer this now—I am merely pointing it out—if the delegated powers committee cannot consider the letter and report to this Committee before Thursday, then the Government should withdraw the amendments and bring them back on Report. That was the clear intention not just in the annexe to the noble Lord's letter: the actual body of the letter referred to the Report stage.

I am pretty clear in my own mind that the body of the letter itself mentioned the Report stage. I should just like to lay that point on the table. I do not necessarily expect an answer but, if there is one, I should be delighted to hear it. It appears that there is no answer from the noble Baroness. That is not very satisfactory.

Baroness Ramsay of Cartvale

I shall happily undertake to reflect on the matter and return to it. I am advised that the delegated powers committee knows that the amendments are to be tabled in Committee. Therefore, there does not seem to be any reason to delay proceedings. The noble Lord said that he has laid the matter on the table and asked whether we can perhaps discuss it further outside the Chamber in order to resolve the problem. As I said, I am advised that the delegated powers committee knows about the amendments. Obviously there is some confusion; indeed, I understand there was some confusion in at least the annexe of the letter and the noble Lord has pointed out that there was also some confusion in the letter. In that case, if the noble Lord agrees, perhaps we can look into the matter.

Lord Mackay of Ardbrecknish

I am grateful to the noble Baroness. I have now found the letter which is dated 2nd October and addressed to my noble friend Lord Alexander of Weedon. One could argue that there is a bit of dubiety in the text because it talks about attaching the text of the amendments, along with further related amendments for Report". I believe that one could read that in two ways. However, when one comes to the annexe, the important thing is that it quite clearly refers to the Scotland Bill on Report. Thereafter, all the amendments are set out and they are the ones which are now before us for consideration.

The real point is not whether they will be considered on Thursday, but when they will be considered by the delegated powers committee. Will that committee meet tomorrow? My understanding is that its next scheduled meeting is set for a week on Wednesday. That is what I find so unsatisfactory. Indeed, both aspects are unsatisfactory. However, if I knew that by Thursday morning I would have a report from that committee on the matter, I would be content. But I shall not be content if I discover that I will not in fact receive a report by that time. Given the fact that we have had two months in which to consider all of this, I believe that the letter to my noble friend indicating such changes could have been sent a little before 2nd October. Perhaps the noble Baroness could further assist me in that respect.

Baroness Ramsay of Cartvale

I shall ignore the noble Lord's last point. However, we can discuss the matter further on Thursday. At that stage we shall know a little more clearly where we stand. It would be best for us to wait until we come to consider these amendments on Thursday. We can then continue the discussion in an effort to resolve the matter.

Lord Mackay of Ardbrecknish

I do not quite know where that takes us. However, if we are to discuss such matters on Thursday, I shall want to have—and I am sure that this applies to all sides of the Committee—the opinion of the Delegated Powers and Deregulation Committee. However, if that cannot be achieved, I do not foresee any problem in the Government simply withdrawing the amendments and bringing them back on Report. I shall certainly not complain if they do so. Indeed, I think that that is the right and proper way to proceed and I am prepared to leave the matter there.

I turn now to the points of the debate which have brought the latter problem to a head. I shall read the Hansard report of what the noble Baroness said about the interplay as regards secondary legislation, primary legislation and tax legislation as far as concerns Amendment No. 286A. If I heard the noble Baroness correctly, I believe that I am probably satisfied with the response. However, I should like to be absolutely sure in that respect.

I was interested to hear the Minister's arguments against the implied deflator for general consumption. I shall discuss these matters with the erudite economist who proposed the amendment.

As regards the other points that I raised, I am satisfied, although somewhat intrigued, by the answers. Part of the reason for my tabling such amendments was to probe what is a pretty impenetrable clause. I was going to have a stand part debate, but I shall not do so. However, I shall register now my disapproval of such incomprehensible gobbledegook. It is not only this clause in the Bill; indeed, it is all the clauses in the financial section of the legislation. The rest of the Bill contains some very good and clear stuff, but this particular section is just about impossible for the ordinary person to read and understand. I suspect that the "ordinary person" includes almost everyone in this Chamber.

The noble and learned Lord, Lord Simon of Glaisdale, pointed out to the Minister earlier that there is a high-powered group chaired by my noble and learned friend Lord Howe of Aberavon, called the tax law rewrite project, whose motto is "making tax law clearer". If anywhere needs a little attention from this group and the people who advise it, it is these seven sections of the Bill, especially the one under discussion today. Will the Minister ask those who drafted this section—not just this clause—to make contact with that group? The group is not difficult to find. It is to be found in one of the Inland Revenue's own offices here in London at Bush House in the Strand. If those in the Scottish Office do not know the address, I shall be happy to write to them with such details. For goodness sake, surely the Government can consider simplifying the legislation between now and the Report stage, so that the ordinary Scot will be able to understand the tax provisions in the Scotland Bill. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 286B had been withdrawn from the Marshalled List.]

[Amendments Nos. 286BA, 286C and 286D not moved.]

Clause 72 agreed to.

Clause 73 [Accounting for additional Scottish tax]:

Lord Mackay of Ardbrecknish moved Amendment No. 286E

Page 34, line 42, leave out subsection (5).

The noble Lord said: In moving the above amendment I shall speak also to Amendment No. 287A. In the two amendments involved here I suggest leaving out subsections (5) in Clauses 73 and 74. They appear to relate to adjustments to the money paid by the Inland Revenue or paid to the Inland Revenue if the Scottish rate of tax is varied downwards. It is suggested that corrections may be needed if a current or previous year's calculation turns out to be inaccurate. Perhaps the noble and learned Lord could explain why the Government need these two subsections. I caution him again with the words that I used earlier; namely, that he also ought to know the address of the tax law rewrite group. I beg to move.

The Lord Advocate (Lord Hardie)

As Members of the Committee will be aware, where tax is varied upwards by the Scottish parliament, the amount raised as a result will be estimated by the Inland Revenue and paid into the Scottish Consolidated Fund. Clause 73 makes provision for this. Clause 74 provides the mirror image where tax is varied downwards. In that situation, payments of amounts are again estimated by the Inland Revenue to be deducted from the Scottish Consolidated Fund and to be paid back to the Inland Revenue.

While the detail of these arrangements has still to be finalised, it is envisaged that payments either way will be made on a set number of occasions through the year and that estimates of the appropriate amounts due will be updated throughout the year and, as necessary, beyond the year in question. This reflects the fact that forecasting of tax revenue is not a precise science. Many factors can change during the course of a tax year which can affect the amount of tax take. Clauses 73 and 74 are specifically designed to reflect this uncertainty and to ensure that whenever and to whatever extent the tax varying power is used will be accurately reflected in the amount of resources which the Scottish parliament takes in or, alternatively, pays back. Subsection (5) of each of these clauses is, in our view, a sensible, pragmatic provision to allow accuracy to be achieved and it should in each case be retained in the Bill. I hope that with that explanation the noble Lord will understand the reasons behind the subsection in each of these clauses. I invite the noble Lord to withdraw his amendments.

Lord Mackay of Ardbrecknish

I am grateful to the noble and learned Lord the Lord Advocate for that explanation. I understand what the subsections mean but I am nevertheless grateful for his explanation. I am still a little puzzled as to why they are needed. I commend to him—as I commended to his noble friend—the tax law re-write group and the whole principle of tax law simplicity. However, as I said, I am satisfied with the explanation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 73 agreed to.

7.30 p.m.

Lord Hoyle

I beg to move that the House do now resume. In moving this Motion I suggest that the Committee stage begins again not before 8.35 p.m.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.