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Industry (Taxation)

3. Lady Olga Maitland: To ask the Secretary of State for Scotland what representations he has received from the business community about the effect of the level of taxation on Scottish industry. [3461]

Mr. Michael Forsyth: The Scottish business community is opposed to Labour's tartan tax and to its proposals to introduce a new trade tax by abolishing the uniform business rate.

Lady Olga Maitland: Does my right hon. Friend agree that the proposals to allow local authorities to set the business rate would sink businesses without trace? They would be faced with enormous tax burdens. That would mean that jobs would be lost and businesses would go under. It would add to the burdens of Labour's proposals for a tartan tax increase of 3p in the pound and for an income tax increase of 9p in the pound. Does he agree that there is only one thing for businesses to do: stay with the Conservatives because we shall keep jobs for all?

Mr. Forsyth: I agree with my hon. Friend and commend to her the document "New Labour's Public Expenditure Plans", which was published by my right hon. Friend the Chief Secretary today and which shows that, in addition to the 9p on income tax, we would have to pay 3p in tartan tax and of course the trade tax, which would be levied as a result of abolition of the uniform business rate. The news of consolation from the hon. Member for Hamilton (Mr. Robertson) is that the business rate increases would be limited to increases imposed by

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Labour councils on the council tax payer, so, in Glasgow last year, business rates would have increased by 19 per cent. That is meant to be the consolation.

Mr. McKelvey: Does the Secretary of State not know that we all know his expertise in taxation? Will he tell the truth and say that, by placing VAT on fuel--a move to which he was a party, and for which he voted--the Government created the most devastating tax that Scotland has had to face since the infamous poll tax? How will he advise old-age pensioners on the issue of whether they should eat or heat?

Madam Speaker: Order. The question deals with the level of taxation on Scottish industry. I hope that the hon. Gentleman will make his question pertinent to it.

Mr. McKelvey: You are absolutely right, Madam Speaker; I got carried away. Is the Secretary of State aware that the business rate paid by industry is only one of the injuries that it has received, and that, this winter, many businesses will lose staff who have to take time off because they have caught colds, because the VAT placed on their rates has created a cold climate in an even colder climate?

Mr. Forsyth: That is the first time that the Government have been blamed for the cold climate. On the hon. Gentleman's concern about the effect of taxation on energy prices, he might like to have a word with his own Front Benchers about the windfall tax, which will do precisely what he is complaining about. As for his point on businesses and jobs, we are currently committing about half a billion pounds a year to maintaining the uniform business rate. Labour would throw away the rate and the competitive advantage that it provides for Scottish business, and fund the extravagant proposals made by Labour-controlled local government, which, in the current year, amount almost to an extra half a billion pounds of expenditure.

Mr. Stewart: Does my right hon. Friend agree that Scottish industry should be extremely concerned about the prospect of a Scottish Parliament that would have unlimited powers to pass legislation on the level of business rates in Scotland? Does he agree that Scottish industry should, as a matter of the highest priority, endeavour to establish precisely the Labour party's policies on those matters by consulting the hon. Member for Hartlepool (Mr. Mandelson)?

Mr. Forsyth: I agree with my hon. Friend on where policy appears to be made, and on the need for concern about the effects of a tax-raising Parliament on the business community in Scotland. Not only would we have to pay a tartan tax, which would mean a 15 per cent. increase in the starting rate of income tax, but funding for our vital services would be put at risk, with all the consequences that that would have for Scottish industry. Furthermore, we would have increases in the business rate, which would destroy jobs, investment and prosperity in Scotland.

Sir David Steel: Is the Secretary of State aware that, following the death of the General Franco, there was, in 1977, an exactly similar debate in Spain? Many Spanish

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businesses doubted the wisdom of setting up the Catalan Parliament, and the "poncho peseta" phrase stood in for the "tartan tax". Is he aware that, if he were now to go to Barcelona, he would not find anyone against the Catalan Parliament, because it has been such a success politically, economically and culturally? Why does he think that Edinburgh would do less well?

Mr. Forsyth: I am surprised at the right hon. Gentleman. If he has made a study of the Catalan Parliament--which may explain why we do not see so much of him here--he will know that the Catalan Parliament is a net contributor to Spain, and that the Catalan economy contributes to the rest of Spain. The situation is the other way round in Scotland. That is why a Scottish Parliament risks our vital public services and why I am surprised that the right hon. Gentleman is still supporting the Constitutional Convention--whereas Lord Ewing, a former Labour Minister, at least had the dignity to resign in disgust at the shambles created by the hon. Member for Hamilton.

Mr. John Marshall: Does my right hon. Friend agree that, if there were to be an independent Scotland or a Scottish Parliament with tax-raising powers, Scottish industry would have a much higher burden of taxation, which would destroy jobs and inward investment, and the unemployment rate in Scotland would reach the level that it is in Spain--as recommended by the former leader of the Liberal party?

Mr. Forsyth: If we had an independent Scotland, we would have a budget deficit problem of about £8.1 billion, and the future of Scottish industry would be an academic consideration.

Mr. George Robertson: Is there not something of a brazen, brass-neck cheek about the inventor of the poll tax accusing anybody else on the subject of taxation? At the last election, the Secretary of State's party told Scotland, including Scottish industrialists, that it would reduce taxation year on year, but it has put up taxes 22 times--the equivalent of 7p on the standard rate of income tax--since then. His party has put VAT on heating. The cold and windy days in Scotland make that the Tory heating tax, and it is felt deeply by everybody. The Government cannot tell the truth about their own tax plans, so why should they expect anybody to believe the lies that they tell about Labour's tax plans?

Mr. Forsyth: There was a moment's frisson when I saw the right hon. Member for Glasgow, Garscadden (Mr. Dewar) sitting in the hon. Gentleman's place and I thought that we might be in for some serious opposition. If the hon. Gentleman finds what we have to say about Labour's tax plans incredible, perhaps he would like to look at a document that has been produced by my right hon. Friend the Chief Secretary, "New Labour's Public Expenditure Plans"--

Mr. Hood: It is lies.

Mr. Forsyth: The hon. Gentleman says that it is lies, yet all of it is in the words of Opposition spokesmen.

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Further Education Colleges

5. Mr. Worthington: To ask the Secretary of State for Scotland how many further education colleges in Scotland were allocated less money by him in this financial year than last year; and what factors underlay this decision. [3463]

The Parliamentary Under-Secretary of State for Scotland (Mr. Raymond S. Robertson): Twenty-one, according to the formula.

Mr. Worthington: I thought that 22 out of the 43 colleges had received less money this year than they did last year. Given that the Minister is budgeting for further education in Scotland to get less money next year, he is saying that, no matter how many colleges work well and attract more students, at least half of them will receive less money next year. What sense is there in such a Government policy?

Mr. Robertson: The hon. Gentleman is totally mistaken. No spending plans on how much will be allocated to further education have yet been decided. He stands up and says that there will be less money, but he does not have a clue how much money will be allocated next year. All I can say is that we have increased spending on further education colleges every year since incorporation in 1993.

Mr. Nigel Evans: Does my hon. Friend believe that, if we went down the route of taking away child benefit from those aged 16 to 18 who hope to go on to further education, it may mean that a number of people who might have stayed on to do A-levels at school will be dissuaded from doing so and will have to go out and find a job? There will therefore be fewer people going on to further education.

Mr. Robertson: My hon. Friend is right. The teenage tax proposed by the Labour party would hit Scots young people harder, since more young people stay on in school in Scotland than in any other part of the United Kingdom. Labour's tax is uniquely designed to hit the young people and families of Scotland.

Mrs. Fyfe: If the Minister is going to encourage his colleagues from southern constituencies to come to Scottish questions, could he first give them a crash course in Scottish education and other matters? How does he expect Scottish industry to thrive if there is not sufficient expenditure on further education courses?

Mr. Robertson: Here we have yet another spending pledge from the Labour party. The hon. Lady seems to forget that we now have more students, studying more courses and getting more and better qualifications in our colleges under record funding from the Government. She would do the further education sector in Scotland a great service if she for once--just once--recognised that.

Mr. Ian Bruce: Do the Scottish further education colleges use the same formula as those in England and Wales? If they do not, do they get less than those in England and Wales, or more?

Mr. Robertson: Further education colleges in Scotland are, of course, funded more than equivalent colleges in

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England. The funding formula that we introduced last year, after full consultation with the colleges, is rewarding student activity and efficiency in colleges, which is surely the right way forward.

Mr. Charles Kennedy: Does the Minister recall that, during an exchange in Scottish questions just before the summer recess, he agreed that a meeting with my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) and myself concerning the funding problems that are being encountered by various colleges, such as Inverness and Thurso, in the north would be appropriate? Given that final decisions have not been taken, but those colleges are, like others--as the hon. Member for Clydebank and Milngavie (Mr. Worthington) said--likely to have future funding problems, could we have that meeting before spending decisions are taken?

Mr. Robertson: The hon. Gentleman is right. I offered a meeting to him and the hon. Member for Caithness and Sutherland (Mr. Maclennan). They have never got back to me to arrange that meeting. Of course I should be delighted to see them.

Mrs. Liddell: Why does the Minister deny that, in 1995, the Government cut £11 million from their previous plans for funding further education in Scotland? Those cuts are not sustainable without redundancies and a diminution in the quality and range of teaching in Scottish further education colleges. Will he accept that his inability to protect Scottish education from the narrow dogma of the right hon. Member for Stirling (Mr. Forsyth) is undermining Scotland's economic future?

Mr. Robertson: Only the hon. Lady could turn an 11 per cent. increase into a cut. Today of all days, she has suggested that the £233 million that we spent last year on further education is not enough. If she was being honest, she would have said how much she would spend. Would she spend another £50 million? Another £60 million? Another £70 million? For us to have an informed debate on further education funding, she must come up with her figures. I stand by what we have done. The hon. Lady is not in a position to respond to me during Question Time, but I give her notice that I shall write to her this afternoon. I hope that she will be able to write back, telling me how much more than our £233 million she would put in were she in my position.

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