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Mr. Michael Ancram (Devizes): Once again, we have heard from the Minister a mixture of condescension and bluster. The one thing that we never get from him is an answer. I hope that he begins to learn that he is now a Minister. He should start behaving like a Minister, not like a member of the Opposition. He holds an extremely important ministry in the Scottish Office and he should be worthy of it. What we have heard from him tonight and in previous debates has been entirely unsatisfactory.
The Minister said something extraordinary. He said that the position was clear--it is all about income tax; there are no other taxes. He went on to say that the amendment would create a false sense of precision. What on earth does that mean? The one thing that the people of Scotland need before they vote in a referendum is a sense of precision.
At present, there is no sense of precision. If the amendment were allowed to stand, there would be the precision that the only tax that could be varied would be income tax. I know, as do my hon. Friends, why the Minister is not prepared to allow a false sense of precision. It would be false, because not only income tax is being spoken about.
Failure to accept the amendment confirms that there is a can of tax worms lying beneath the surface of the document, and the Minister hopes that when the people of Scotland find that out after the referendum, it will be too late. It is sleight of hand to pretend that the reference is only to income tax. There are back-of-the-hand taxes, indirect taxes and a vicarious tax.
I realise that the Minister considers it essential to keep that from the Scottish people before 11 September. I shall ask him one or two questions to demonstrate why I hold that view. If income tax is the only tax concerned, why will he not accept that description, which makes the position clear?
The Secretary of State said in his statement last Thursday:
If the limit is 3p in the pound and that 3p will not get £450 million, which is guaranteed, the money will come from somewhere else--not income tax. That is why the Minister is not prepared to have that descriptor in the Bill.
I shall ask the Minister straight and hope that, for once, he will answer straight: under the proposals, would the Scottish Parliament be able to raise new taxes--for example, by the introduction of a property tax, as is rumoured in some of the Scottish papers, or some other form of indirect taxation? Will the Minister categorically say yes or no?
Mr. McLeish:
The answer is no. The Parliament will have no powers to do that.
We move on, then, to the next question. Does the White Paper's empowerment of a Scottish Parliament with control of local government expenditure, non-domestic rates and other local taxation allow restructuring of those forms of local taxation, or altering of the amounts that go to local government for those?
Would it be possible for a Scottish Parliament to decide to retain some of the revenue support grant to pay for its own programmes, possibly to make up for the shortfall in the £450 million, knowing that the effect would be to force councils to put up council taxes to meet it? If that power exists, does the Minister agree that that may not be a direct form of taxation, but that it is a back-door form of taxation? Would the Scottish Parliament be able to do that, or would something prevent it?
My hon. Friend the Member for North Essex (Mr. Jenkin) mentioned business rates or non-domestic rates. Is it within the power of the Scottish Parliament to restructure non-domestic rates in such a way that more taxation is borne by businesses in Scotland? In effect, the Parliament will have found a back-door means of raising revenue.
As he is posing questions to the Minister, I ask my right hon. Friend to draw the Minister's attention to paragraph 7.26 on page 25 of the White Paper, which states:
I am grateful to my right hon. and learned Friend for finding yet another indication in the White Paper that the Minister's initial assertion--that
income tax is the only tax-varying power available to the Scottish Parliament--is incorrect. I hope that the Minister will face that fact.
Will the Minister also confirm whether the power to alter or restructure local government taxation would allow for the introduction of a local sales tax, for instance? Would that then allow a Scottish Parliament to hold back some of the non-domestic rates or revenue support grant to finance--again, through the back door--its own programmes in a way that is not possible through income tax? Will the Minister also explain what provision his income tax calculations make for the variations between pensioners--who apparently will have to pay income tax on their pensions in Scotland--and those who have savings or dividends and are not pensioners? What provision has been made to meet the variations that that could cause in the tax base?
In all seriousness, I urge the Minister to make a clear statement tonight. The Scottish people are already concerned about the prospect of having higher taxes than those in the rest of the United Kingdom. They already fear the disadvantage that they would experience in terms of business competitiveness and living standards. The Minister may disdainfully accuse us of not representing Scottish constituencies, but I have on-going Scottish connections and I visit Scotland. I know that people in Scotland fear the imposition of 3p on income tax--and their fear that there is a can of tax worms waiting to be opened is even greater. Everything that I have said tonight suggests that there is such a can of worms.
The Minister could calm the fear that other taxes are hidden within the foliage of the White Paper by accepting this simple amendment. If the Minister persists in rejecting the amendment, there can be only one interpretation, and it will strike fear in the hearts of Scottish taxpayers, whether direct or indirect. New taxes are the only possible explanation. Conservative Members are appalled by the crass proposition to have variable income taxation within the United Kingdom. We believe that that will work only to the disadvantage of Scotland--both businesses and individuals. We are even more appalled by the Government's covert agenda for further taxes.
The tartan tax is a body blow. The existence of a collection of clan tartan taxes, each more invidious than the other, would amount to a horrifying deception of the people of Scotland. We need to know what those taxes are. The only honourable way in which the Minister can deny the existence of such taxes is by withdrawing his disagreement with the Lords amendment and by clarifying that income tax will be the only tool available to the Scottish Parliament. If he does not take that opportunity tonight, we shall ensure that the people of Scotland are made aware of the can of tax worms that lies within the White Paper. We shall ensure that the canny people of Scotland--who are canny in every sense of the word--are not taken in easily by the deception perpetrated by the White Paper.
Leaving the worms metaphor aside, the measure is a Pandora's box of unintended consequences.
First, there is the "3 per cent. question". If more and more people, under Government policy, are removed entirely from tax liability, the burden of the 3 per cent. rate will be borne by a reducing percentage of the
population. The Scottish Parliament's spending plans would then be increasingly dependent upon decisions about tax rates taken in Westminster, over which it would have no control.
Secondly, there is the "who pays question". Will everyone domiciled in Scotland be affected? What are the consequences for Inland Revenue? Will tax officers at Bootle, Shipley, London and elsewhere have to sort out Scots tax from English tax, and what will be the costs of so doing? Is it feasible in a single United Kingdom administrative and fiscal region to have different tax rates applying to the earnings or investment incomes of different citizens according to where they live or work in the United Kingdom?
Thirdly, there is the "peripatetic question". Will there be a wholly arbitrary exemption for companies? What will be done about peripatetic business men--or Members of Parliament, for that matter--who spend more than half the year outside Scotland? We might not be caught by the residency rule but, if we escaped, one can imagine the howls of outrage.
Fourthly, what about English people who are on "temporary secondment" to Scotland for six months? Will they be treated as being resident for a whole tax year, and therefore subject to higher Scottish income tax?
Fifthly, there is then the "question of tax varying". Assuming that the Barnett formula will be retained, what will be the consequences for the financial arrangements between Scotland and the rest of the United Kingdom if the Scots decide to increase income tax by 3p in the pound? Will the United Kingdom Government be expected to put the same amount into Scotland as though the income tax were the same as in England and Wales? If the Scots decided to cut taxes, would English taxpayers be expected to make up the difference?
Sixthly, I have alluded to the "Chirnside question" before. I must save time. It raises the same issues as the Boston tea party.
Seventhly, there is also the question of tax investment. If devolution leads to a higher-cost economy in Scotland, we must make decisions that take account of that fact. Firms such as Scottish and Newcastle would be deeply affected by this. Whatever one thinks about the management of such firms, the fact is that they employ many of our constituents. If there is a choice to be made between investing in the north or just south of the border, that will become a factor. We are not talking about taking operations away from Scotland; the issue is one of new investment in Scotland and is mixed up with the problems of rotating staff between Scotland and England.
"Subject to the outcome of the referendum, the Scottish Parliament will be given power to increase or decrease the basic rate of income tax set by the UK Parliament by up to 3p."
Fair enough. He went on to say:
"The Parliament will have a guaranteed right to raise or to forgo up to £450 million--index-linked--irrespective of changes in the UK income tax structure."--[Official Report, 24 July 1997; Vol. 298, c. 1043.]
30 Jul 1997 : Column 413
What happens--this is the key question--if there is a change in the bands, which is not declared by the Chancellor of the Exchequer, or a change in taxable income, as happens at boom times and at times of recession, when 3p would raise more or less than £450 million? If it raises less, from where will the extra money come to maintain the guarantee that a Scottish Parliament could raise up to £450 million, as the Secretary of State said?
7.45 pm
"The Scottish Parliament will be responsible for determining the form of local taxation . . . It will therefore be able to alter the form of the council tax, or replace it if it so decides."
That is a reference to the Scottish Parliament's power to introduce a variety of local taxes to replace the council tax. Unless we limit the schedule in the manner proposed in the other place, it could be treated as an authority for doing that.
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