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5.45 pm

I now turn to the questions that the hon. Member for Woodspring asked about tax. Again, he was largely complimentary that the Government had clarified an important matter that was raised in the House previously. I also refer to a point that was raised by my hon. Friend the Member for Linlithgow.

There have been good discussions with representatives of the Law Society of Scotland, the Confederation of British Industry and the Institute of Chartered Accountants in Scotland. Following debate in Committee in another place, my noble Friend Lord Sewel, the Minister for Agriculture, gave undertakings to look again at the drafting of clause 71, and a useful meeting with the representatives of the three bodies concerned took place on 21 October. Proposals for basing the definition of a Scottish taxpayer on the concept of residence were discussed. While there were a number of differing views around the table, there was recognition that applying the concept of residence in this context could give rise to some very serious anomalies, which had been raised previously in the House.

There was, however, also a general acceptance that most of the difficult cases that had been identified could be removed or substantially diminished if the Government were to amend the definition of a "day spent in Scotland", so as to remove the double counting which can arise under the current provision in clause 71(4)(a).

That provision says that a day spent in Scotland means any day in which a person is in Scotland at the beginning or end of the day. It was pointed out that, for example, a

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lorry driver who spent 92 non-consecutive nights in Scotland in his cab could qualify as a Scottish taxpayer because of the double counting. I am pleased to say that the Government have listened to those concerns and amendments Nos. 109 and 110 address precisely this issue. They will ensure that if a person is in Scotland at midnight, he will only clock up one day spent in Scotland. Therefore, assuming that a person spends the entire year in the UK, he would have to spend 183 nights in Scotland before qualifying as a Scottish taxpayer. The three organisations involved were content with the amendments on the basis that they substantially address their concerns about clause 71 and I hope that the House will agree.

In reply to the hon. Gentleman's final points, the Scottish Office is working very closely with the Inland Revenue and the Treasury on tax powers, which will continue until the infrastructure is in place. Any outstanding issues will not only be discussed by the Scottish Office, the Treasury and the Inland Revenue, but will involve the organisations referred to by the hon. Member for Woodspring and by my hon. Friend the Member for Linlithgow. I hope that I have adequately responded to the concerns that have been expressed.

Dr. Fox: I am grateful to the Minister. On his final point, which is a matter of some concern, I raised three terms: principal home, place of residence and main place of residence. On-going discussions with the Treasury will have to be structured as any change in UK tax law in respect of those definitions will obviously have an impact on Scottish taxpayers for UK taxes. Is this one of the areas where the Government intend to have a concordat? Will there be a formal mechanism of discussion and if so when might we see it?

Mr. McLeish: The answer is, no, there will not be such a mechanism in respect of those issues. In the circumstances, I shall assure the hon. Gentleman first, that the discussions, both those between the Treasury, the Scottish Office and the Inland Revenue and those with the key organisations I have mentioned, are on-going; and, secondly, that I shall write to him and other Opposition leaders detailing the current state of play on the matters that have been raised. I am sure that the contents of that correspondence will reassure the House that everything possible is being done to ensure a smooth transition to the infrastructure required for the new tax-varying power.

Mrs. Eleanor Laing (Epping Forest): May I ask the Minister for further clarification on a few points? Amendments Nos. 90 and 93 relate to the audit of expenditure by the Scottish Executive. I am sure that the Minister will agree that it is an extremely important point of principle that the Auditor General and anyone carrying out an audit should not only be independent, but be seen to be independent. In answer to my hon. Friend the Member for Woodspring (Dr. Fox), the Minister said that he considered that those matters were dealt with in amendment No. 95 and new subsection (6), but I do not think that they clarify the point. Therefore, I ask the Minister for an assurance that independence is assured for anyone who carries out an audit in those terms.

On amendment No. 106 and the question of who pays for the general register of sasines and the land register, is the Minister saying that it will certainly be the Scottish taxpayer who pays directly, rather than the matter being

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paid for out of national taxation; or is the effect of his answer that they will still be paid for out of national taxation, but accounted for in a different way so that they appear to be taken account of in the Scottish block?

On amendments Nos. 109 and 110, it is good to see that the Government have taken account of some of the points that Conservative Members have insisted are anomalous since the beginning of the Bill's passage. Many matters have caused us to be concerned that, subsequent to the enactment of the legislation, the Parliament would be unable to operate because of the in-built anomalies. I hope that the Minister will pay tribute to the work done in another place, where the anomalies have been smoothed out. Many times when we raised such anomalies in this place, the Government ignored us. I hope that the Minister will commend the work of the other place, which has been extremely valuable, although I do not expect him to go so far as to say that he hopes that the other place will continue in its present form. If the work had not been done in the other place, the Bill would not work.

Mr. Deputy Speaker: Order. I did not want to stop the hon. Lady while she was in full flow, but I should point out that we are discussing Lords amendments, not the Bill in its entirety.

Mr. Robert Syms (Poole): I intend to make only a brief speech, dealing mainly with amendments Nos. 109 and 110. I welcome the amendments, because they clarify points raised in earlier debates. I was interested in the Minister's comments about a person having to be in Scotland for 183 days at midnight before qualifying for taxation. How are tax inspectors to police that provision? In addition, Deloitte and Touche has raised a point about split-year concessions, which are possible under United Kingdom tax law. How would that be applied to Scotland? The clarification provided by amendmentsNos. 109 and 110 is welcome because the Bill contained major problems.

To re-emphasise what my hon. Friend the Member for Epping Forest (Mrs. Laing) said about audit, I am a little worried about the term "independent" being removed, because its presence would strengthen the power of an auditor. To remove it might well weaken the hand of the person doing the audit and strengthen that of the Executive. I am therefore a little wary of amendments Nos. 90 to 93, and I should like a little more reassurance from the Minister.

Mr. McLeish: On the last point, the hon. Gentleman has my total reassurance. As the note in my hand says--it is more generous than the official advice--the removal of the word "independent" is an illusion. AmendmentNo. 95 covers it entirely.

The members of the consultative steering group have been determined to build on the auditing procedures used in this House. Hon. Members will find that a combination of the legislation, which is tough, and the work of the steering group, which is putting flesh on the bones, satisfies them that the issues are being taken seriously. Independence means independence. I hope that that also covers the first point raised by the hon. Member for

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Epping Forest (Mrs. Laing). The amendments are technical, but the main principle behind them is not a technicality--independence must be guaranteed.

The adjustment in respect of the register is, in a sense, a technical one in terms of debt and the loan fund. The important point is that fees pay for the whole amount, so it does not fall as a burden either on the taxpayers of England, Wales and Northern Ireland, or on those of Scotland. That should clarify the hon. Lady's point.

The other issues raised relate to amendments Nos. 109 and 110. The amendments have clarified and helped to resolve a problem that was troubling many hon. Members, which is why the Government took it seriously. On the other hand, many of the comments made about taxation have been unnecessary--to describe them as distorted or exaggerated would be going too far. They have been taken care of in the discussions with the Inland Revenue, the Treasury and the expert organisations to which I referred. We do not foresee any problems arising, because we have a great body of UK tax legislation and the experts are working with the Scottish Office to ensure a smooth transition from the current position to the implementation of the tax-varying power, if the Parliament decides to use it after the elections on 6 May.

Lords amendment agreed to.

Lords amendments Nos. 89 to 112 agreed to [some with Special Entry].

Clause 83

Cross-border public authorities: initial status

Lords amendment: No. 113, in page 39, line 32, leave out ("sections 106, 107 and 108") and insert ("section 106")

Mr. McLeish: I beg to move, That this House agrees with the Lords in the said amendment.

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