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House of Commons

Tuesday 8 December 1998

The House met at half-past Two o'clock

PRAYERS

[Madam Speaker in the Chair]

MESSAGE FROM THE QUEEN

Queen's Speech (Answer to Address)

The Vice-Chamberlain of the Household reported Her Majesty's Answer to the Address, as follows:

I have received with great satisfaction the loyal and dutiful expression of your thanks for the Speech with which I opened the present Session of Parliament.

Oral Answers to Questions

SCOTLAND

The Secretary of State was asked--

Tax-varying Powers

1. Mr. Graham Brady (Altrincham and Sale, West): If he will make a statement about the technical measures to allow tax-varying powers to be introduced in Scotland. [61263]

The Minister for Home Affairs and Devolution, Scottish Office (Mr. Henry McLeish): The Government are working to ensure that the tax-varying power will be fully in place and available for use by the Scottish Parliament from April 2000. The Inland Revenue has consulted widely and is continuing to work with a group of industry representatives on the measures required for implementation of the Scottish variable rate.

Mr. Brady: I thank the Minister for that reply. It will obviously be an expensive and inefficient process to administer a Scottish tax. The Government claim to be opposing vigorously proposals in Europe to harmonise taxes with the United Kingdom, on the grounds that such harmonisation would be bad for the United Kingdom. Will the Minister confirm that it would also be bad for Scotland if its tax levels were higher than England's?

Mr. McLeish: The Scotland Act 1998 has been premised on the basis that we want to provide a level playing field across the United Kingdom in the regulatory powers affecting industry. Moreover, I remind the hon. Gentleman that, on 11 September 1997, the Scottish people decided that they would like the Scottish Parliament to have power to vary the basic income tax rate. That power was endorsed by the Scottish people, and we are in the process of implementing our commitment

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on it. We believe that it is right for the Parliament to have such a power, and it will be up to the Parliament and the parties in it to decide whether to use it.

Mr. John Home Robertson (East Lothian): I do not think that my hon. Friend needs to take any lectures on expensive and ineffective taxation from those who gave the poll tax to Scotland. May I try asking my hon. Friend a hypothetical question? If he were minded to set up a Scottish army, Scottish navy and Scottish air force, and to establish Scottish embassies around the world, does he think that he would be able to do so from revenue of threepence on income tax?

Mr. McLeish: I shall resist the temptation to go down that particular road. However, I think that the House might be interested to know that the Labour party has ruled out use of the tax when we are elected to Holyrood, whereas the Scottish National party is still dithering and confused about whether it might use it. Suffice it to say that, in a recent weekly publication, the SNP suggested that if it did not use the Scottish variable rate, it might want to consider


The real challenge is for the nationalists to come clean on the Scottish variable rate.

Mr. James Wallace (Orkney and Shetland): Will the Minister of State confirm that the tax-varying powers, if used in full, amount to £450 million? Will he confirm also that further sums should be within the Scottish Parliament's direction, but that, according to media reports today, United Kingdom Departments are trying to find ways of not informing the Scottish Parliament about those funds? Will he say what action the Scottish Department has taken to ensure that the Scottish Parliament will not be short-changed, and that the concordats will be honoured in both spirit and letter?

Mr. McLeish: It has always been the case, and always will be the case, that we will get what we are entitled to. There is no plot to snatch back funds from the Scottish Administration.

Mr. John McAllion (Dundee, East): Is not a vote in favour of a tax increase by the Members of the Scottish Parliament currently the most important technical provision allowing a tax increase in Scotland? Does my hon. Friend agree that, although such a vote would grab headlines in Scotland, it might not do the same elsewhere in the United Kingdom? Does not that fact make the case for a separate Scottish "Six O'Clock News" programme broadcast and controlled from Scotland, and underline the boneheadedness of those in the BBC who are trying to prevent such a separate Scottish broadcast?

Mr. McLeish: I am, yet again, being tempted down another road, which I shall again resist. On the important issue of taxation, suffice it to say that the Scottish people endorsed the measure on 11 September, and that we have been working very hard with the Inland Revenue and the business community to ensure that it is a success. Regulations will in the near future be laid before the House, putting the flesh on the bones of the measure.

Dr. Liam Fox (Woodspring): The Minister of State will undoubtedly be aware of Scottish Life's estimates of

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the compliance costs--£170 million--of the tartan tax, regardless of whether it is used. Will the Minister tell us what discussions he and other Ministers have had with the Inland Revenue on compliance costs, and on who will pay the required sum? Will it be paid out of the Scottish block or by United Kingdom taxpayers as a whole?

Mr. McLeish: Throughout the process of discussing the Scottish variable rate and other matters in the Scotland Act 1998, we have been in close consultation with the Inland Revenue and with the business community. Of course we have also dealt at length with the assurance industry. We are working with a consultative group of industry representatives on formal compliance cost assessments for future publication, and we are fully aware of the concerns that have been expressed by the life assurance industry. It is one area in which dialogue has met with success.

We are convinced that we shall have the Scottish variable rate power available from April 2000, which is what matters to Scots. I can reassure every hon. Member that it will be done in an efficient way, to ensure a value-for-money approach at all times.

Dr. Fox: That was an answer that we can chew over in Hansard to see whether we are any the wiser. Does the Minister agree that the real danger is that of backdoor taxes, with different groups competing to spend Scottish taxpayers' money? Keith Geddes, the president of the Convention of Scottish Local Authorities, suggested a bed tax on tourists, Lord Steel suggested a caravan tax for visitors and Scottish Natural Heritage has suggested a sightseeing tax around Loch Lomond. Will the Minister give a commitment on behalf of the Labour party to rule out not only the use of the tartan tax, but an increase in the overall burden of tax on the Scottish people via the Scottish Parliament?

Mr. McLeish: Those concerns were brought to the House early in the debate on the Scotland Bill. It is now an Act, published on 19 November, but the Conservatives appear to have learnt little. The power exists to vary the Scottish basic rate of income tax. We think that that coincides with the wishes of the Scottish people and with the wish of the business community not to be inundated with new taxes. That will be the settlement for the Scottish Parliament. We shall have it in place by April 2000.

Mr. Dennis Canavan (Falkirk, West): Will my hon. Friend remind the Tory party that the people of Scotland voted in the referendum just last year for a Scottish Parliament with the power to vary tax? Does he agree that there is a strong case for the future development of fiscal autonomy for the Scottish Parliament, to give its Members the responsibility for raising the money that they want to spend on important services such as the national health service and education, instead of being dependent on decisions taken by the United Kingdom Government or votes in this House?

Mr. McLeish: My hon. Friend is right to point out that the Scottish people have endorsed the Scottish variable rate--it is important to underline that. It is also important to stress that the use of the variable rate is a power available to the Parliament. Any party can stand on a

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manifesto to raise that money and spend it. The Labour party has decided not to stand on such a policy. I challenge the nationalists to come clean and say whether they would use the Scottish variable rate. If not, what other sources of funding would they have?

Economic Development

2. Mr. Andrew Lansley (South Cambridgeshire): When he next intends to meet representatives of Scottish Enterprise to discuss economic development. [61264]

The Secretary of State for Scotland (Mr. Donald Dewar): My colleagues and I regularly meet Scottish Enterprise, which plays an important part in the Government's proposals to modernise the Scottish economy. The most recent meeting was between my noble Friend the Minister for business and industry and the chairman and executives of Scottish Enterprise on 4 December.

Following assurances given to the Select Committee on Scottish Affairs, my strategy guidance to Scottish Enterprise entitled "Renewal and Enterprise" is being published today, and a copy has been placed in the Library.

Mr. Lansley: I am grateful to the Secretary of State for that reply. When he next meets Scottish Enterprise, will he acknowledge that, with unemployment rising in Scotland, 12,000 job losses announced this year and business surveys increasingly showing falling order books in Scotland, he and his colleagues, particularly the Chancellor of the Exchequer, have left Scottish Enterprise ill equipped to respond to the impact of the Government's macro-economic policies?

Mr. Dewar: I shall start at the bottom--that is probably appropriate when dealing with the hon. Gentleman's questions. The budget for Scottish Enterprise is more than £440 million this year. It is adjusted, but remains substantially above £400 million. The reasons are that Hyundai did not come on stream, we are spending £70 million through the new deal on training and we decided, with the agreement of Scottish Enterprise, that it should spend less on property and more on its mainstream activities.

On the Scottish economy, the hon. Gentleman could not be more wrong. Of course none of us knows what the future holds, but he will know that the unemployment claimant count is at its lowest since 1977, that last month's unemployment figures again showed a drop in Scotland and that, looking at not just the bad news headlines but the good news headlines about the creation of jobs, there is a significant balance in Scotland's favour.

Ms Sandra Osborne (Ayr): May I take this opportunity to express the gratitude of the people of Ayrshire to my right hon. Friend and his colleagues for their response to the ending of Jetstream 41 production at Prestwick, which was to set up the Prestwick task force? As a member of that task force, I am aware that the report to be published shortly will show that substantially more jobs have been created than were originally lost. Does my right hon. Friend agree that such partnership working sets a good example for elsewhere?

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Mr. Dewar: Yes. I thank everybody, including my hon. Friend, who served on the Prestwick task force. It has been a success. I am also grateful to the firms that took the opportunity presented by the site at Prestwick. It is now a hub of activity and I am sure that it will grow and prosper in future. My hon. Friend the Member for East Lothian (Mr. Home Robertson) had a similar experience with the closure of Mitsubishi at Haddington, where energetic local action, using local talent, skills and advantages, did much to redress the balance.

Mr. Archy Kirkwood (Roxburgh and Berwickshire): When the Secretary of State next meets Scottish Enterprise, will he continue to discuss the particular difficulties being faced in south-east Scotland owing to the recent spate of redundancies? Is he aware that there is high expectation in the borders that when the Scottish Office working party reports in the next few days it will provide adequate additional resources to make a significant difference to those difficulties? In particular, will he make sure that any projects to expand employment in existing local businesses arising through the Scottish Enterprise network will not be knocked back by central Government because of a lack of funds?

Mr. Dewar: We have made it very clear that good, viable projects will be encouraged in every way. That applies across Scotland, but we are particularly aware of the difficulties in the south of Scotland and in the hon. Gentleman's constituency. We cannot offer the prospect of immediate success in solving all the problems, but there are a number of encouraging factors.

There is a very good spirit of co-operation in the area and we have every intention of continuing to work closely with local interests. Some of the matters that were raised with me when I was there have been dealt with in another way and in another forum. For example, the recent settlement of some of the immediate anxieties of the farming industry has been widely welcomed in the south of Scotland.

Dr. Norman A. Godman (Greenock and Inverclyde): My right hon. Friend will forgive me for being parochial, but when he next meets representatives of Scottish Enterprise will he urge upon them the need to assist the further development of the waterfront at Port Glasgow--not in my patch--Greenock and Gourock? The Government also need to assist with the proposal by Clyde ports for the development of a passenger ferry terminal at Port Glasgow. It makes excellent sense and would provide lots of jobs on the lower Clyde.

Mr. Dewar: I of course appreciate the importance of the issue that my hon. Friend raises. There has been a great deal of work and a great deal of success has been achieved. There have also been disappointments, such as the unfortunate closure of National Semiconductors, but new jobs have also been created, for example at IBM, on a very extensive scale. Again there is a balance to be struck. I am aware of the particular project to which my hon. Friend referred at the end of his question; it is something that we will watch very carefully.

Mr. Nigel Evans (Ribble Valley): Is not the truth of the matter that job losses are on the increase in too many parts of Scotland? While the Secretary of State

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concentrates on trying to get another job for himself--a prospect that is fading faster after the north-east Euro by-election--others are losing their jobs. With high interest rates compared with the rest of Europe, too strong a pound hitting exports, and high on-costs on wages even before the minimum wage starts pushing unemployment even higher, is the only hope for those losing their jobs due to Government policy to follow the lead of the Paymaster General and advertise their availability for hire in the "Yellow Pages"?

Mr. Dewar: I suppose that the hon. Gentleman is trying to add to his reputation as a statesman. Obviously he was not listening or decided to ignore what I said earlier. If we compare the job losses that have been announced since the beginning of the year and the job promises that have been made--I recognise that promises do not always turn into reality--and even if the promises are only two thirds fulfilled, it is clear that we are in balance.

Unemployment in Scotland has been falling steadily. I shall not attempt to predict the future because there is a world crisis and a contagion of fear in the international market--we cannot be totally immune from that--but we have a stable economy as a result of two years of tough but necessary decision making by my colleagues in the Treasury. We are thus in a good position to ride out the problems, and the figures remain encouraging.


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