UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 775-iii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Scottish Affairs Committee

THE SCOTLAND BILL

Wednesday 9 FEBRUARY 2011

TERRY MURDEN and BILL JAMIESON

DAVE MOXHAM and ANDY WIGHTMAN

Evidence heard in Public Questions 315 - 444

USE OF THE TRANSCRIPT

Oral Evidence

Taken before the Scottish Affairs Committee

on Wednesday 9 February 2011

Members present:

Mr Ian Davidson (Chair)

Fiona Bruce

Mike Freer

David Mowat

Fiona O’Donnell

Mr Alan Reid

Simon Reevell

Lindsay Roy

Dr Eilidh Whiteford

________________

Examination of Witnesses

Witnesses: Terry Murden, Business Editor, The Scotsman and Scotland on Sunday, and Bill Jamieson, Executive Editor, The Scotsman, gave evidence.

Q315 Chair: Thank you for coming to see us, gentlemen. As you know, this is the Scottish Affairs Committee. We are looking at the Scotland Bill, but in parallel we are also running an investigation into the economy in Scotland and the development of business, so we hope to be able to touch on some of those issues as well. If you read The Scotsman at all, you will have seen a recent editorial suggesting that we should not rough up our witnesses. We realise that you are delicate flowers and should not be asked hard things or anything like that by impertinent oiks like ourselves, but if you don’t mind, we will try our best to raise some points with you. Mr Jamieson, when I heard you speak on the euro I thought you were a bit soft and insufficiently robust, so hopefully you will be straight to the point today. We are not asking people only from The Scotsman; we asked a number of other journalists as well, but they were not able to come.

What we are particularly interested in is hearing your views of the Scotland Bill and how it impacts on business, and since you will meet many more businesses than we will, your view of their view. I wonder whether we could start off by asking you what you believe to be the main strengths and weaknesses of the proposals for strengthening financial autonomy within Scotland, the responsibility within Scotland, and how you think this impacts upon the business sector. Maybe we can start with you, Mr Jamieson, or Ace Enterprises as you described yourself in one of your recent articles.

Bill Jamieson: I did. Thank you very much indeed, Chairman, for inviting us. We do appreciate the opportunity to try and cast some light on the circumstances and the feeling and mood music around the Scotland Bill in Scotland. One thing I would say is that it is primarily a political Bill; in other words, it is designed or intended to improve the transparency or accountability of the Scottish Parliament. It does not claim, and it does not set out to be, a Bill that is an economic tool, or that will affect Scotland’s economic performance. It is not a tool for raising the GDP performance of Scotland. It does not set out to do that.

I would say that among the business community, apart from one notable exception, there is a great deal of apathy-maybe neutrality is the best way to put it-about the Bill. It has not set the heather on fire among the business community. I would add two points to that on either side. There is a group of business people who are associated with the Campaign for Fiscal Responsibility, led by Ben Thomson, which broadly supports the Hughes Hallett/SNP position. Are they representative of business? No. On the other side, again on the margin, there is CBI Scotland, which is rather concerned about the amount of time and concentration taken up by the Scotland Bill. It represents a constituency in the business world which is saying, "We have a lot of problems to deal with between now and 2015 or 2016 which we fear have been pushed to the margin with concentration on the Scotland Bill and the debate between the proponents of the Bill and Professors Hughes Hallett and Andrew Scott". So there is a concern within some of the business community that it is taking the eye off the ball of what you can do with the powers that Scotland already has within its gift to improve its economic performance-all the micro things it can do.

Terry Murden: In so far as the business community is engaged in this at all, it is only going to be concerned about whether it increases its costs. As we know, business is going through difficult times at the moment and I think it will take a sceptical view of anything that appears to impose change, because it sees change as being another burden. An income tax cut would be nice and everybody would welcome it, but if anything, most businesses would fear that their costs would rise with any powers given to Parliament to change tax.

Q316 Chair: Would it be fair for us to take the view that, with the caveats you mention, as far as business is concerned, there is no enormous concern about potential threats, or indeed opportunities, flowing from the Bill at all, and-taking Bill’s point-that the devolution process being accelerated, and the transfer of powers, will not in itself result in a magical increase in GDP and general happiness and prosperity?

Terry Murden: As far as I can see, there is no evidence to support one argument or the other. Clearly, there are two camps here. One tries to claim that greater fiscal autonomy and lower taxes, which they assume may flow from that, would lead to higher growth, but there is another school of thought that says there is no evidence of that happening. Even in countries like the US, which has cut taxes, there is no hard evidence that it has increased GDP. If we look at this Parliament, we have had a cut in income tax from Westminster, but the economy is hardly booming. You cannot say that one necessarily leads to the other.

Q317 Fiona O'Donnell: When I met Alfie Allen when he came to give evidence I said how excited I was, so I really feel that I should say to you, Bill, what a thrill it is for earthlings like us to meet stars from the media firmament like yourself. You can tell that I might not be so nice in my next question. In terms of the way the debate is evolving in the media, we have had quite a bit of interest in the Holyrood Committee’s scrutiny and your own McGonagallesque, if I may call it that, commentary on things like Scottish citizenship. I did not know whether it was really serious or it was for fun, because it was very clever and witty. Generally, how do you think the debate is evolving? Is it really just a case of journalists having fun with it, or is there some serious debate out there in the media?

Bill Jamieson: The debate about the Scotland Bill is taking place at, if you like, one remove from the immediate problems facing business and the economy in Scotland. It is a very, very tough time. You will know far better than I that the problems being faced in the public sector-redundancies and Government cutbacks-are impacting on many companies that supply goods and services to the Government sector. These are the immediate worry points and concerns. You are asking people to focus on the consequences of a piece of constitutional legislation that will not take effect until, I believe, 2016. Looking through to that, there is a residual concern about exactly how this variable income tax will work. Who will be responsible for determining who is, or is not, a Scottish taxpayer or a Scottish citizen from the point of view of tax? There was a very good paper written by the Institute of Chartered Accountants of Scotland, which I recommend to the Committee.

Fiona O'Donnell: It has given evidence.

Bill Jamieson: Chartered accountants are not, perhaps, the most gripping people on the earth, so I wrote about this in a rather humorous manner in order to engage public attention, but I hope it brought out some of the complexities here about who is and who is not a Scottish citizen for the purposes of income tax. The Institute of Chartered Accountants said you had to have a statutory definition of citizenship. Unless you have that, you are going to put into effect legislation which is open to challenge, and the rulings could prove very arbitrary. Once that starts to happen, public acceptance of a tax change really starts to crumble; people can point to anomalies that were not intended. It is very important to maintain public support for a tax. You may get agreement on the principle but it is very important that you have a piece of legislation that, in practical terms, you are confident will work, and will not send HMRC into a terrible spin with its IT processes, and in which the public have confidence that when they get their tax demand it is broadly the correct sum they are being asked to pay up.

Q318 Fiona O'Donnell: You have said that giving these new financial powers to Holyrood does not in itself boost our economic performance in Scotland. Professor Muscatelli said the same thing. It is about what the Scottish Government does with the powers it has just now, and the powers it gets. Do you think that is why the debate is focusing on these issues? If councils can deal with who lives in a council area and is liable to pay council tax in that area, is this really such a great challenge for Scotland?

Bill Jamieson: That is a very good point. You might say that one of the things missing from the debate about the Scotland Bill is that you do not detect any strong lobby either side of the power to vary tax. In other words, there is not a strong lobby to say that this is a fantastic means to raise the level of income tax, to put more money into Government services, and to avoid all these cuts. I do not think that lobby is there. Equally, I do not think there is a very strong lobby for bringing down the rate of income tax, particularly in today’s climate. I do not detect that as an area where people want to go. It is almost an abstract debate about having a power, like putting a big blunderbuss, a big gun, on a wall in a glass case that says, "Do not break except in emergencies."

Terry Murden: Yes. After all, we have had the power to vary income tax by 3p and it has not been used. There is a suspicion, I suppose, as Bill was saying, that this current plan will not be used, and we are dancing round the subject a little bit.

Q319 Chair: And public opinion in Scotland reflects that view-that this power, being unlikely to be used, is not worth debating that much?

Terry Murden: When you talk about public opinion, public opinion, as far as it is expressed through The Scotsman in particular, is focused on this issue about fiscal autonomy. It has been an academic debate, largely, with various parties coming down in favour or against one view or other. To a certain extent, that is drawing away from the main issue of the Bill. The Bill, of course, does not suggest fiscal autonomy, but that is how the debate has moved; it has moved away from what the Bill is proposing. The debate has almost become about what is not in the Bill rather than what is actually in it.

Q320 Chair: You have both mentioned fiscal autonomy on a couple of occasions. I wondered about the extent to which you thought that autonomy was a weasel word for separation or independence, and was being used by people who did not want to use the word "separation" or "independence" but were trying to disguise it behind a different term that is more neutral, as it were, thereby avoiding the opprobrium that "separation" has generally attracted.

Terry Murden: The supporters of it, such as those whose letters we read in the letters pages, have articulated a lot of this. There are those who want the Bill to provide Scotland with more powers over other taxes, such as corporation tax, inheritance tax, property taxes and so on. I suppose eventually you get to the point where you have to ask if this is a kind of independence by stealth. If you keep giving more and more powers, at what point do you declare the country to be independent of Westminster?

Q321 Fiona O'Donnell: Was devolution not always, as people are fond of saying, a process rather than an event?

Terry Murden: It may well be.

Q322 Fiona O'Donnell: But not necessarily a motorway to independence?

Terry Murden: Yes.

Q323 Lindsay Roy: It is your contention, from what I can gather, that the business community is largely apathetic to this because it has more immediate interests and pressing priorities, and the population at large are not really engaged-it is a bit of a diversion for them-so really it is political anoraks and economists who are involved in this. Would you agree, however, that it is imperative that we do our very best to get it right?

Bill Jamieson: Yes.

Q324 Lindsay Roy: And that the focus should be on accountability?

Bill Jamieson: Correct, because there is no doubt that there is an asymmetry at the moment. In Scotland we have a Holyrood Parliament that has powers to spend but no powers to vary tax significantly. That leads to a situation where all the debate in Scotland and in the Scottish Parliament is about spending money with none of the responsibility of having to raise it significantly. The result is that there seems to be, if you like, a compression and a concentration and squeezing of as much money as we possibly can out of the Barnett formula and the Barnett consequentials, whereas there is a very strong case for Parliament to have more responsibility and more accountability to voters through the tax system. To that extent there is a very powerful argument for this Bill.

Q325 Lindsay Roy: Therefore, do you think that as we approach the Scottish parliamentary elections this will have a higher profile?

Bill Jamieson: Yes.

Q326 Lindsay Roy: It has not been particularly prominent in the media, apart from one or two aspects.

Bill Jamieson: Yes, correct.

Q327 Chair: Terry, do you have anything to add to that?

Terry Murden: I think that is a fair comment. Trying to engage with the general public is going to be quite a task. At the moment it is focused more on whether or not the powers that it is proposing would help to boost economic growth although, as Bill says, that is not the fundamental purpose of it. Even from the point of view of the general business community, there is-it is probably wrong to say that it is a lethargy; probably they have not quite understood what is happening. When you dig lower than the main lobby groups like the CBI and the IOD and so on, people are so busy getting on with just trying to stay in business and keeping the wolf from the door that things like this seem to be rather hypothetical. They have not realised that this change may well come about.

Also, there is an argument put around that business will not be able to cope with the proposed tax changes and that it will be too costly and difficult administratively. My view is that that is rather overplayed. Companies are quite capable of dealing with different tax codes and jurisdictions. Anyone who has operations overseas has to deal with this kind of thing. That is probably a little overplayed. But I do think there is going to be a concern that there will be some form of added cost and until people explain to businesses what this is about and what they can get out of it-what the benefits might be-they will be sceptical at best and just kept in the dark at the moment about exactly what it all entails.

Q328 Lindsay Roy: In essence, there are quite a few hares running and part of the role of the press is to inquire, and to see what evidence there is to support the views that are being put forward.

Chair: Part of the role of the press is to start hares running.

Bill Jamieson: No, we don’t do that. But one significant factor here is that we have passed through, if you like, two time periods for this legislation. The Calman Commission was set up in the world of sunshine and idyllic economic growth in 2005 and 2006. All the figures and all the projections that are laid out in the Calman Report relate to a world that no longer exists, or has changed fundamentally with the financial debâcle, the recession and everything that has happened since. My perception is that the political momentum behind the Calman Commission and the Scotland Bill has run into the changed circumstances that Scotland is now in. I would say that there is a mood of much more caution and conservatism about undertaking constitutional change. The impetus, if you like, is not quite what it was in 2005 and 2006 when Calman was being conceived. It is not as if public opinion was at this stage in 2006 and has strengthened throughout the process. No, I do not think so.

Q329 Dr Whiteford: If I may, I would like to pick up the issue of asymmetry that you alluded to earlier when you were talking about the accountability question of money raised in Scotland and the money spent in Scotland. There have been some real discrepancies in the estimates of the impact of this Bill. The Government’s figures estimate that we will move up to about 35% of the money. I know that some of the other evidence we have received has suggested that it could be as low as 26%. I just wondered whether you had a view on that, if you had an opinion in terms of the assessments that have been made.

I was also quite keen to know, picking up on what you have just been saying about the Calman Commission proposals, if you would have liked to have seen the commission, or perhaps, in our current context, the Bill, go much further in picking up on drivers of GDP, as you said right at the start.

Bill Jamieson: If I may take the second part of the question first-I cannot answer the first part-just to position ourselves here, The Scotsman, as a paper, very much favours going further than the Scotland Bill. We see an intellectual rationale for including corporation tax as part of the legislative change. We believe that because we are very concerned about the state of the Scottish economy and the imperative need for drivers of growth to get us out of this rut that we are in and this period in which the Scottish economy has consistently been under-performing, compared to the rest of the UK. That is where we are in broad principle. That is not to say that we are not attentive to the points I was making earlier about making sure that the detail and the practicality-the engine underneath the bonnet of the legislation-works.

On the first part of the question about the differences in the estimates of how much tax Scotland would have under its power in the legislation, we really are in the hands of expert witnesses and, one hopes, very sharp estimates from the Treasury and the Office for Budget Responsibility, because there is this gap between the estimate of how much tax we raise and how much tax actually comes in.

Q330 Dr Whiteford: That is very helpful. Referring to the first part of your answer, I wonder to what extent you see the Bill as a genuine step forward.

Bill Jamieson: I pause because there is a sense that it is an opportunity missed. There is a very powerful argument for having a much stronger, greater and more serious debate about what Scotland has to do and where Scotland has to go. We have hesitations about whether this legislation is sufficiently powerful of itself to generate and catalyse the debate that has to happen in Scotland. We are not there yet.

Q331 Dr Whiteford: Do you have anything to add to that?

Terry Murden: We are getting into the realms of the issue that I mentioned earlier-into whether this is a drift towards independence. You are getting very heavily into the political debate rather than the economic or the business debate, which is where we came in. One thing that I see is that, whereas the Union parties are behind the Calman Commission pushing a greater transfer of tax powers, when we had an opportunity, as in the large retailers’ levy, which was very controversial recently, they all opposed it. On the one hand, there is this push to try to give the Parliament more tax-raising power, but when push comes to shove they all seem to hesitate and not want to go forward with it. I do wonder whether this Scotland Bill might eventually get pushed into the long grass. We may get all of these powers but never actually implement them and the debate will simply rumble on until such time as someone decides whether or not to pull the lever on full independence. How you achieve that is another matter.

Q332 Chair: Obviously, that pleased Eilidh, but could I pick up the point about this being an opportunity missed to have a debate about what happens in Scotland? I think we are allowed to criticise The Scotsman, aren’t we? Is that okay? You are not going to report me to your editor, are you?

Bill Jamieson: Feel free.

Q333 Chair: Good. I see that you have a reporter here as well to back you up. You are absolutely right that opportunities have been missed, in terms of having the debate about the future of Scotland, Scotland’s business and so on. The Scotsman, along with a number of others, has been guilty of conflating that debate with the constitutional debate and assuming that one is the same as the other. The other day we had before us a representative of the Federation of Small Businesses. He told us that one of the major difficulties that his members have experienced in employing people is of kids being illiterate, innumerate, unable to work in a normal society and all the rest of it. They were insufficiently socialised. The Scottish Parliament has had powers over all these things for some considerable time and they have not been addressed. I wonder about the extent to which The Scotsman is guilty of sloppy thinking in assuming that it is only by the constitutional route that these things are resolved. It is a bit like the Hughes Hallett and Scott view that if you transfer economic powers, growth will come-if you build it, they will come-whereas there is a whole number of areas where the Scottish Parliament has had powers and has not done anything with them. It is grossly negligent.

Terry Murden: If you look at the example of Parliament itself and the trams and other things that it has had the ability to influence, they have hardly been-

Q334 Chair: How can you say that this Bill is a missed opportunity when you are then using as evidence for that the fact that there has not been this general economic debate about whither Scotland? Explain that.

Bill Jamieson: I think your criticism is most unfair, Chairman.

Q335 Chair: And that will be reflected in tomorrow’s editorial.

Bill Jamieson: Most unfair. Almost every day we write about all the micro-measures we have to take to improve productivity, output and certainly skills training. Skills are a very big issue, and not just in Scotland, but right across Europe and the advanced economies, as Eilidh will have heard.

Dr Whiteford: Yes.

Bill Jamieson: I do not think that this Administration in Scotland has been remiss in its attention to skills training, because it seems to attract an awful lot of money and attention, but there is no doubt that the report from the FSB that you heard is echoed by other institutions and other parts of civic Scotland that are picking up on this, so please do not think it is just the FSB. That is a big problem.

As for saying that we conflate issues, we certainly do not believe that constitutional change is the key that will magically unlock and bring about a transformation, but we have a very serious concern, particularly as we approach the Holyrood elections in May, that we are hearing from the parties in Scotland very little in the way of innovative thinking about how things can be improved. This is quite depressing.

Q336 Chair: Terry, do you want to add to that at all?

Terry Murden: I think that that is a reasonable summary. Bill talked about this Bill as being the first step-a stepping stone for where we end up. I am not quite sure what journey we are on with this process. I am not sure whether the Scotland Bill is an attempt to grant more power or to try to restrain the Parliament in some way by not giving it exactly what it wants. We certainly will not get a settled will from this, I am sure, and there will be pressure for more change.

Chair: I think we have already talked about this being a process. There are those who assume it is a one-way process. The rest of us see it as being an iterative process, in the way that some powers are being transferred back to Westminster and others are being transferred to Holyrood. Therefore, there will be a constant exchange as people examine these things. Fiona, you wanted to come in.

Q337 Fiona O'Donnell: Yes. Thinking back over the questions that Ian, Lindsay, myself and Eilidh have asked, a lot of them talked about the scope of the debate. In terms of the inquiry we have had at Holyrood, and Eilidh was talking about the claim that the powers would allow the Scottish Parliament to control only 26%, I wonder if you feel that the scrutiny at Holyrood has elevated the debate. I know the paper has been critical of the treatment of some witnesses. You then get Professor Scott saying in his evidence to Holyrood, "We can get close to 20 per cent, if not 25 per cent, but we cannot get 35 per cent. However, we are happy to accept that that might relate to the data set on which we are working, which is disputed." Even if the only conclusion you come to is that if you laid all the economists in the world end to end they would not reach a conclusion, we need this kind of scrutiny and level of debate to ascertain what the opportunities and risks are in this Bill.

Bill Jamieson: I could not agree more. I have to say, as a point of clarification, yes, The Scotsman did express some concern about, if you like, the manners of the Scotland Bill Committee. On the substance, on the interrogation of Hughes Hallett, we thought it was absolutely admirable, and that these points should have been brought out. It was very interesting that when the questions drilled down into the academics that were cited by Professor Hughes Hallett, like Lars Feld, for example, and got into his paper and what he was saying, it was found that he was much more ambiguous about this issue as to whether fiscal decentralisation brings economic growth. He was much more ambiguous about it. It also picked up on other parts of Hughes Hallett’s evidence which had been very partial with one economist; he had taken only a partial piece of his research which was drawn from experience of devolution in China and was based on Chinese statistics. Thank goodness we had some forensic analysis of that paper.

Q338 Fiona O'Donnell: So it was the sneering, rather than the substance, that perhaps left a bad taste in the mouth?

Bill Jamieson: Yes, quite.

Fiona O'Donnell: That is very helpful. Thank you.

Chair: So far, you are not complaining about us either, as I understand it.

Bill Jamieson: I don’t want to.

Dr Whiteford: You are all smiles.

Chair: So far. The night is yet young.

Q339 David Mowat: Mr Murden, I am interested in your view in terms of the business community. Do you think there is an issue with the level of scrutiny round the settlement that has been arrived at so far, in terms of the Barnett formula, which is thought by many to mean that the settlement that Scotland receives is higher than that in other parts of the UK, which could potentially institutionalise a larger public sector north of the Border and may not be positive to GDP growth as a whole? Is that an issue you have come across?

Terry Murden: The short answer is "not very much". I do not think your average businessman worries about that kind of thing. I do not think it keeps him awake at night.

Q340 David Mowat: That is not an issue you consider, from the point of view of The Scotsman, either?

Terry Murden: It is not an issue that I would get particularly engaged in, no.

Bill Jamieson: I would respectfully disagree. I think that among some of the more thoughtful businessmen there is a worry that over-dependence on-

Terry Murden: I did say "the average businessman".

Chair: So the average businessman is not thoughtful? Right, we have got that.

Bill Jamieson: There is an over-concentration on Barnett, absolutely, and on spending decisions to the neglect of the whole economy. Sometimes I listen to debates in the Holyrood Parliament and I get the sense that they feel that the economy is the Government sector, the public sector.

Terry Murden: But, with respect to you, Bill, this is not exclusive to Scotland. There are other parts of the UK where there is a large preponderance of public sector activity and these issues are of equal concern. We have this imbalance that the coalition is allegedly trying to correct.

Bill Jamieson: Yes, but there is an imbalance.

Terry Murden: Undoubtedly there is an imbalance.

Q341 David Mowat: It is true of other sectors of the UK. The premise of my question, though, was that the settlement, if you like, as a result of a higher level of expenditure in Scotland, may have a displacement in other types of economic activity. But thank you for your answer.

I would like to go back to your point on residency, Mr Jamieson, which you have written about, and your concerns about the way that it is all going to work in terms of how many nights you spend and all the rest of it. I understand that, but what do you see as the alternative?

Bill Jamieson: The alternative is to have very good, watertight legislation and a statutory definition of who a Scottish taxpayer is for the purposes of tax collection and tax assessment. One of the things that the ICAS report picked up, which is quite relevant, is that you cannot split a tax year. In other words, you could spend quite a lot of time working outwith Scotland, but as far as HMRC is concerned, you may be taxed as if you spent all your time in Scotland. Many people would feel that to be inequitable. The whole purpose of having a tax assessment is to arrive at a fair and just assessment of the tax that people owe, and people will pay if they share the feeling that it is a fair and just assessment.

Another issue is to whom the Scottish part of HMRC is accountable. As I understand it, it is going to be like a unitary tax here, which will bring together Holyrood and Westminster tax in one unit. There will not be two separate tax bodies. But I suspect there may be a lot of pressure for the Scottish HMRC end to be accountable to the Scottish Parliament. We are not quite sure to whom this enlarged HMRC would be accountable.

Q342 David Mowat: In terms of your first point, you say there is a need to look for equity and justice, and that is right, but there is always a balance between equity and justice and ease of legislation, in a sense. I can imagine that if you had a statutory definition of a Scottish taxpayer there would be issues around that as well because they are going to move. If it is not based on residency, how would you come up with some kind of statutory definition of a Scottish taxpayer? It seems to me that what is being proposed in the Bill is reasonably pragmatic.

Bill Jamieson: I think that the Institute of Chartered Accountants of Scotland would beg to differ and say that if you proceed down those lines you are in danger of putting into legislation an Act that is open to all sorts of ambiguities and arbitrary routes.

Q343 David Mowat: Ambiguity is relevant to what you have said about the residency days and all the rest of it, but I am having difficulty seeing what an alternative might be or how that could work; that was all.

Bill Jamieson: Surely that is in your hands, because you are the legislators.

Chair: But we seek to be guided.

Q344 David Mowat: Was your second point about reconciliation between the Revenues?

Bill Jamieson: Yes.

David Mowat: I am not sure I wholly understood that. Again, I think how this would work is that an employer would account for the revenue. He will have two boxes on PAYE and one would go to Scotland and one to England and it would be added up and sorted out. I am not quite sure I follow the point that you are making.

Bill Jamieson: I was wondering about the accountability of the HMRC itself. Is it answerable to Westminster or answerable wholly or partly to the Scottish Parliament?

Q345 Fiona O'Donnell: Chair, can I say I see an issue there, given that the Scottish Government is going to pay the bill?

Bill Jamieson: Yes.

Fiona O'Donnell: You would think that if you pay the bill for HMRC’s services, there would be some accountability.

Bill Jamieson: Yes. This bill has been estimated at between £45 million and a top figure of about £150 million.

Q346 David Mowat: I think that number is without any impact on business; that is the central number.

Bill Jamieson: One hopes so, yes.

Q347 Fiona Bruce: Good afternoon, gentlemen. I want to go back to creating the right environment for business people to feel confident to do business-to be entrepreneurial and to take risks. You said that you can see benefits or merit in there being greater fiscal devolution, but that is not happening at the moment to the extent of, perhaps, including corporation tax. You said that other things could be done, such as concentrating on skills development, and said that the CBI felt that the Government had taken its eye off the ball in connection with all the micro things that could be done. I would like you to develop that. What else would you like to see happen to give business confidence again?

Bill Jamieson: Gosh. If you look at some of the submissions that have been put in from bodies like the FSB, which you mentioned, the chambers of commerce and CBI Scotland, you will get quite a long list of very familiar things. Just as they present to the UK Parliament, I am sure they raise the same issues with the Scottish Parliament. For example, one issue is on planning and how helpful and useful the system is to the entrepreneur. There has been progress in introducing pre-planning assessments in Scotland to try to speed up what has been a chronically slow system.

If you read today’s Scotsman, Mr Chairman, in case you missed it-I hope you did not-you have the example of Penelope Keith; it took her six years to get planning permission for a café. Come on; why does it take so long? It is an extreme example, but there are problems with the planning system and how to make the planning system more efficient and responsive and to speed up the appeals process. That is a big, big issue with business.

There have also been concerns about the Holyrood Administration’s changes to the system of non-domestic business rates, which have hit the hotel and leisure sector particularly hard, and there was the recent attempt to introduce an out-of-town superstore tax to raise £30 million for the Scottish Government. It has been called all sorts of things. We even called it a tax on food. The concern of the business community was that, had that gone through, it would have established a precedent for picking off other sectors in just as arbitrary a manner.

Terry Murden: If I could pick up on that, it comes back to what I saying about the Bill; it seems to allude to the opportunity for the Government to bring in new unspecified taxes, as I understand it. There was talk of an aggregates tax, aviation tax and these kinds of things. Those have been suspended for the time being, but the idea of new taxes, which seems to be undefined, will bother businesses because they do not like this kind of uncertainty. They want to know precisely what they will be able to do.

Business, fundamentally, needs to be able to get its goods to market as quickly and cheaply as possible. Anything the Government can do to help it achieve that aim has to be positive. I would add transport to the list of things that Bill mentioned. The transport network is creaking, not just in Scotland but around the country. As a regular commuter on the M8, I know that it can take me two and a half hours to travel 65 miles door to door. It should not take that long. And we still have problems with the rail network. All of that ties in again with the planning system, which is ridiculously slow. The whole process of Government is slow.

Business gets concerned about too much government-being over-governed and having too many processes of decision making. They want things to happen quickly and to get their products to market quickly and not be impeded by bureaucracy, added cost, added taxes and inconveniences that seem to be put in their way at every step. All of these act as a disincentive to invest and develop new businesses. Wealth creation is a big factor that should underpin everything we are trying to do. There is a concern that the powers of tax and so on included in the Scotland Bill will be used by parliamentarians to fund their pet projects and that it will not be for the benefit of the country as a whole, let alone the economy. They will seize on this opportunity, having been given the keys to the candy store, to go and help themselves. We have to make sure there is proper accountability and responsibility among parliamentarians that helps to finance growth correctly. I am not quite sure that the Bill really specifies how it intends to achieve that.

Q348 Fiona Bruce: Thank you. You said that the Scottish economy has consistently been under-performing with regard to the rest of the UK. I would be interested in your analysis of that and also your sense of what I would call the morale of the business sector, which is a very fragile thing. Business people can be cautiously optimistic or, if you like, almost frozen in terms of not wanting to take on any staff. I know that when the recession began the mindset was, "Let’s just see if we can survive", and there was absolutely no expansion within that mindset. Where do you think the morale and mindset is now in the Scottish business sector?

Terry Murden: To pick up the "under-performing" bit, Scotland’s economy has under-performed compared with the rest of the UK for a good many years. No one seems to be able to break that cycle. There have been odd occasions when GDP growth has been above average, but it tends to be temporary. No one has really found the answer despite all the money thrown at organisations such as Scottish Enterprise and all the other schemes and initiatives we have, and have had over the years. I think it also adds to the scepticism and perhaps impacts on morale among the business community that what we will get as a result of this Bill are yet more initiatives and schemes that will just go round in circles, and that once again it will be back to base.

Q349 Mike Freer: Taking those things in reverse order, if you have an unwieldy public sector, it never grows its productivity to the same degree as the private sector. We have seen that over the last 30 years. If the public sector is too large in Scotland, then clearly it will always under-perform the parts of the UK that have a more balanced economy.

Going back to the almost doomsday scenario you were painting about tax autonomy-businesses closing down because they are over-taxed, over-regulated and over-burdened-I find that quite exciting, because if those people who are paying the bills start to see the consequences of the bills, they might start to challenge those who are levying taxes that are too high. It goes back to what Mr Jamieson was saying: that the debate is imbalanced because the debate is all about spending.

Terry Murden: We have mentioned one example-this large retailers’ levy. Once the Parliament has been given an opportunity to raise tax, there is an outcry.

Q350 Mike Freer: Or they could cut it.

Terry Murden: They could cut it, but business tends to believe that they will not.

Q351 Mike Freer: Is that not a good thing?

Terry Murden: Of course it is a good thing. It is a good thing if it does not mean that something is impacted adversely as a result of it.

Q352 Mike Freer: But as the taxpayers start to see businesses closing down and fleeing Scotland because it is a high-tax zone, as we have seen in the federal economies of the States-

Terry Murden: And, with respect, we are seeing it here in this city, where some companies have gone abroad because of high taxes.

Mike Freer: They relocate to a lower-tax area.

Terry Murden: Yes.

Q353 Mike Freer: I appreciate that it could be a doomsday scenario, but the upside is that if the voters of Scotland start to see that the high tax policies of their Parliament are destroying jobs, they might start to challenge their politicians a bit more. Is that not a good thing?

Terry Murden: It is, but then they only have a chance to change it every four or five years. A lot of damage can be done in that time.

Q354 Mike Freer: I understand the doomsday scenario, but I rather see it as an opportunity to challenge the politicians to rein in taxation.

Terry Murden: There is a link between changing the amount of money raised from tax and the revenue risk that you get from that, if you like. As the one goes up and down, there is an impact on the amount you get. I suppose there would be concern that if you cut taxes, where will the revenue come from?

Q355 Mike Freer: The argument is that growth accelerates, so the total tax take increases.

Terry Murden: It is unproven.

Bill Jamieson: Quite right. The balance of opinion in Scotland currently-this may depress you even further-is that it is Government and public spending that generate economic growth, so there is another dimension here of argument to open up, but it is getting off the point. But many people do believe that.

Q356 Lindsay Roy: Is it not also the case that we need to promote social wealth? In particular, I am looking here at cultural change in our education system so there is a much stronger promotion of enterprise initiative within our schools, so that there can be further encouragement to start up businesses. From my experience as a former head teacher, more of that needs to be done.

Bill Jamieson: What you say is absolutely right. However, that does not alter the fact that when people leave school and have the choice, or had the choice up until very recently, of going into business or starting up on their own and going into the Government sector in one form or another the odds are stacked so heavily in favour of taking the Government job route. There is job security, better pay, pensions-everything. The whole thing is just so skewered.

Terry Murden: And once they are in the public sector they are not persuaded to leave it and go into business because it is too much of a risk.

Q357 Lindsay Roy: That is why I mentioned cultural change. An attitudinal change and change in mindset is vital.

Terry Murden: In my view, it is the single biggest reason why we have a low rate of entrepreneurial activity. Certainly, up to now there have been too many people in well-paid jobs-there probably will not be in future-who may have made very good entrepreneurs and might have run very successful businesses, but they are in a comfort zone that they do not want to leave.

Q358 David Mowat: The point I was making earlier when I asked the question was just that. The consequence of the way the settlement works at the moment has precisely the effect on Scotland that you have just set out, which is a displacement effect.

Bill Jamieson: Yes.

David Mowat: It was portrayed as being perhaps a very good thing for Scotland to have a relatively generous settlement-I know that not everyone agrees on this- under the Barnett formula. It causes the impact you describe, which, over time institutionalises a mindset which says that the Government produces economic activity. Actually they are right; in a sense it does, because that is how it works at the moment, and it is very dangerous.

Q359 Chair: To put a slightly different view on it-again, it is always difficult to build points from personal examples-I think of my own children, who worked for a while in the private sector, in the hospitality industry in Scotland. Having been there for a while on the minimum wage, being treated appallingly, they decided, "I’m not staying in that any longer than I can possibly avoid." I can understand why a lot of people get out of the private sector and into the public sector where generally they are treated much better, like human beings, and are not exploited in the way some people are in the private sector. I think there is a balance to be struck. But I come back to the question of corporation tax. I presume that The Scotsman is not campaigning for the Scottish Parliament to get powers over corporation tax in order to increase it.

Terry Murden: No.

Q360 Chair: You are assuming that if the Scottish Government get power over corporation tax they will reduce it. We have had evidence from a number of witnesses who have said that the evidence for saying that immediate cuts in corporation tax will grow the economy is not proven over the short term, and the real danger of devolving corporation tax in Scotland was that Scotland would seek to cannibalise corporation tax revenues across the United Kingdom as a whole, which of course would be better for Scotland. If you are a Nationalist you can understand why you would want to do that, because in those circumstances you would not care about a decrease in corporation tax in England, Wales and the rest of the United Kingdom. Are you not guilty of a bit of superficial thinking here? That is a trite solution, is it not? I understand that you want corporation tax cut, but surely the objective could equally be met by corporation tax from the United Kingdom and it would be much more honest if you just campaigned for a cut in corporation tax rather than say that you want to have the powers transferred.

Bill Jamieson: That is a very good point. You will know better than I the sort of ferment on what it is that should be done to help revive and rejuvenate areas of the economy outside the south-east. It is by no means a Scottish-only problem, as you will well know. All sorts of quite radical ideas are being revisited here about what we can do about the regions to stimulate business activity in the regions. In principle, we are in favour of a reduction in corporation tax for two reasons. First, we think that tax competition in principle is a very good thing. I would imagine that if we ever came close to a situation where there was a Scottish Government that had power to alter business tax or corporation tax, that would be watched very closely across the other nations and regions of the UK and it would encourage tax competition downwards, particularly for the business sector here. That is one argument.

You are right to point out that there is a not proven verdict on the economic evidence for cutting corporation tax. Does it lead to economic growth? It is very difficult to isolate cuts in corporation tax in themselves as generators of growth. The other complicating factor is that in many countries in Europe, particularly Eastern Europe, where there is a flat rate of corporation tax, other taxes are quite high. In terms of the inward investor, there is not a great deal of benefit simply because the corporation tax looks to be at a lower rate when you find that your other taxes are higher. What we would hope is that what comes with the philosophy, if you like, of lower business tax is a lot of other things that are pro-business, proentrepreneur and pro-enterprise and that begin to kick-start the culture change you identify.

Terry Murden: Our view on that is that a package of measures, rather than one single measure, is needed. For instance, if you take the situation in Ireland which, as we all know, has had a very low rate of corporation tax, that must have contributed to the growth of the Irish economy. As we know, the Irish economy is now in a mess, but that is not related to the fact that it has a lower rate of tax; it is because of other things that went wrong in the Irish economy. There is a danger of seeing one tax being used in isolation from all the other economic tools that exist. To come back to the Bill, if one of its purposes is to help the economy it has to look at a range of things. For instance, on Sunday we wrote about the fact that a campaign was running to reintroduce enterprise zones, which I understand George Osborne is looking at ahead of the Budget. There is going to be some rivalry about where these new zones may be. You have to look at all the business rates packages.

The differences among the business community on this are notable as well, because the CBI in Scotland does not support changes to corporation tax; it wants a uniform single market for the UK, yet the CBI in Northern Ireland is campaigning for a cut in corporation tax, so even the business organisations themselves are not united on this. As to the entrepreneurs, Jim McColl has singularly been calling for a range of what he calls incentivising taxes or other measures that would help the economy. My view is that, yes, a cut in corporation tax is bound to be a stimulus, but I do not think that in itself it would necessarily help. If you cut corporation tax here and raise the cost of something else here, you merely eliminate the advantage immediately. In the case of Ireland they cut corporation taxes and then recklessly lent money, so they lost those advantages.

Q361 Chair: Your case is slightly more sophisticated, but as I took the position you put forward, Mr Jamieson, you were saying that it was not proven that cutting corporation tax would increase economic growth, but you want it devolved anyway. I do worry-and we are quite entitled to worry-about this question of cannibalisation from the rest of the United Kingdom. You will never be able to beat Bermuda or the Cayman Islands, if it comes to a question of tax competition and where plants will be. I am not sure that that route of competition downwards leads anywhere but madness.

Bill Jamieson: It is very difficult from an academic point of view. If you are an academic and you have been set the test of identifying the factors that stimulate economic growth, it is very difficult to isolate a lower rate of corporation tax in itself as the catalyst. But you will find that in many countries that have reduced corporation tax there is also a set of other business-friendly measures. That is the point.

Q362 Chair: To be fair, that is different, isn’t it? We are running another inquiry in parallel with this one. It started before the Scotland Bill inquiry and will run after it, because this is more time-restricted. It may very well be that if we have not upset you too much, we will ask to see you again to try to pursue these sorts of issues.

Bill Jamieson: Yes. You raise another interesting point: the extent to which the debate that we are having here about the Scotland Bill has resonance in other areas of the UK which have very serious economic problems: the north-east, north-west, west midlands and the west of England. They must listen to this debate with a great deal of interest and apprehension, and may well feel, "Why does Scotland get all this attention and focus? Our problems are equally severe and deserving of attention."

Fiona Bruce: Clearly, your politicians are shouting about it.

Chair: Those areas do not have The Scotsman.

Q363 Dr Whiteford: I represent a part of the country where there is absolutely no shortage of entrepreneurial spirit and entrepreneurs. I think we have the highest proportion of self-employed people in the whole of the UK. One of the very real challenges they face is the distance from market. That is one of the biggest barriers to economic growth in my part of the world. I see that day in, day out, with local companies. That has added-on taxation in fuel costs and the massive fuel taxation that goes forward. In a debate about corporation tax, is there a degree of unidentified taxation that we need to offset to create a more level playing field across the UK as a whole? I wonder what your thoughts are on that.

Terry Murden: This is not just a matter of tax. If you are talking about bringing advantage to other deprived areas of the country-

Q364 Dr Whiteford: It is remote, not deprived.

Terry Murden: Remote, okay. Just recently I heard the argument that a six-lane motorway connecting the Highlands with the central belt would unite the country significantly, bring the whole of the north into the central belt, help the growth of that area and unite a country which is quite separated in that respect. This is nothing to do with tax. It is simply the ability to get about easily and the ability to get goods to market more easily. Anyone who wants to take the A9 route and take their life in their hands knows what is involved.

Q365 Dr Whiteford: In that respect, do you think the borrowing powers in the Scotland Bill are adequate?

Terry Murden: I understand that most of what they are being allowed to borrow goes on the new bridge, and there is another £500 million left in the pot, which goes against the National Loans Fund. Whether that is enough, I am not in a position to say. But my point is that you cannot look at just corporation tax or even taxes generally as the only stimulus for the economy. If you look at any of the emerging nations, and even the wealthy areas of the world like the Middle East, China and places like that, what do they do? They build an enormous international airport and power stations, one a week in the case of China, and put in all the infrastructure-road networks-and make sure everybody can get about properly and get to international markets easily, and have the energy that they need. If they do not have enough energy, they go out and buy it from somebody else. They put all their ducks in a row, to use a business expression, to make sure they can get on with the job. It is no good saying, "We’ll spend six months talking about changing this little tax here," or "We might put in a bit of dual carriageway over here"; that is just tinkering around. We will not see any step change in the economy if we continue on that path. That is the basic history of the country.

Bill Jamieson: We also have a very rudimentary planning system. I do not think they have the equivalent of Historic Scotland on their back, do they?

Q366 Chair: No, but to be fair, when we are discussing the question of changes in the Scotland Bill, you mentioned earlier delays on the M8. That has been devolved for ages; the same is true of the question of the A9. All of that has been devolved for ages. As to power stations, there is devolved power over planning, yet we have stations being blocked. It is not, in a sense, a constitutional settlement that is required to deal with these issues, is it? This is a question of a wider debate about Scotland that has been, as it were, overwhelmed by a debate about constitutional tinkering.

Terry Murden: Exactly, but if you go right back to the beginning of this conversation, in my view businesses will be more concerned to see the M8 turn into a six-lane motorway than about the academic arguments about certain issues in this Bill. Fiscal autonomy may be somewhere out there. For a start, they are not quite sure what it is, but what they do know is that when they are stuck in a traffic jam, that causes them a problem in getting their business done.

Q367 Mr Reid: There are two other taxes that have been devolved in the Bill, landfill tax and stamp duty. Has the business community said anything about that? Is it worried about it? Does it think it is a good idea, or is it apathetic?

Terry Murden: Only inasmuch as those are things that the ones who want to see a greater range of taxes devolved have included on that list.

Q368 Mr Reid: Is the feeling that there should be more taxes?

Terry Murden: No. There is no consensus. If you speak to Iain McMillan at the CBI, he will say that he is delighted that there are no plans to move corporation tax, employment law, company law and all that kind of thing and that they will continue to be reserved matters.

Q369 Fiona O'Donnell: One thing that sometimes gets missed is that the Bill proposes the Scottish Parliament can raise new taxes. Only two out of the four made it into the Bill. Is there concern about that?

Terry Murden: Yes. As I said earlier, this imponderable power to create new and unspecified taxes leaves people feeling slightly uncertain about what they might be. The worry among business people is that as soon as the politicians, with all due respect, get a chance to exercise power over tax, they may well raise those taxes.

Q370 Fiona O'Donnell: That is after 11 years of the Scottish Parliament having the power to vary income tax, and it never has done.

Terry Murden: Exactly. They have not used it.

Fiona O'Donnell: They are still concerned?

Terry Murden: And the powers they have had have been used in such a way that people feel there is no tremendous track record. We have seen £500 million poured into the Edinburgh trams, which is deemed to be a waste of money. There is a concern that if they are given power over even more expenditure, they will waste it likewise.

Q371 Fiona O'Donnell: Is there something essentially different about politicians in the Scottish Parliament? I am not quite sure where this argument goes. Is it just "Do not let politicians deal with taxation," or is there a particular distrust of the Scottish Parliament?

Terry Murden: You have to look at the track record of the Parliament; it has not exactly covered itself in glory with these things, has it?

Q372 Fiona O'Donnell: With things like the trams, specifically?

Bill Jamieson: It may come back to the fundamental argument for having the Scotland Bill. If you give the Scottish Parliament the responsibility for having to raise 26% or 35% of the revenue in taxation, the theory is that there will be a better, more informed debate about public choices on spending and taxation. I do not know whether the tram system fits into that, because long after the thing went through and was approved all sorts of problems were discovered with utilities that nobody anticipated. Basically, the argument is: you will get a better debate, a more informed Parliament and a better quality of decision making.

Q373 Fiona O'Donnell: Do you think that the supermarket tax is an example of an informed debate and Government listening?

Terry Murden: I think it is, yes.

Bill Jamieson: It was a very well informed debate, because the tax was defeated.

Terry Murden: It is curious that the parties that propose transferring more power and responsibility are the ones who opposed the large retailers’ levy. We have a slightly odd situation there.

Q374 Chair: Are there any points that you want to leave with us, or answers that you have prepared to questions we have not asked? Do you want to attack us on anything? Have we treated you outrageously, or are you entirely happy? So the editorials tomorrow and at the weekend will not reflect badly on us, and my mother will not feel any obligation to disown me or anything like that? Is that true?

Terry Murden: We will have a meeting outside to debate that.

Bill Jamieson: Feisty but fair is our initial summation.

Chair: Fine. On that happy note, thank you very much.

Bill Jamieson: And if you want to get a letter into The Scotsman, just give me a ring and I will do my very best.

Chair: Indeed. Thank you.

Examination of Witnesses

Witnesses: Dave Moxham, Deputy General Secretary, Scottish Trades Union Congress, and Andy Wightman gave evidence.

Q375 Chair: Maybe we could make a start. I had intended to start this session by asking Mr Wightman to sign a copy of his book. I went out this morning to try to get one. Did you know that there is not one to be got within walking distance of here? Waterstones told me that there was not a copy available in any of their stores south of York, which is obviously something you need to pick up with your marketing manager. Given that general introduction, you can tell that you will not get a particularly hard time from me or any of my colleagues, I think. We are generally supportive. However, we will start off with Dave, if you don’t mind. What is the line of the STUC on the Scotland Bill? Is it a unanimous line? If there are divisions, what is the nature of them?

Dave Moxham: As you would expect, the position of the trade union movement is finessed by the STUC and amalgamated. As you know, we have 30-plus different organisations and slightly different perspectives. It is pretty fair to say that the position I represent today is the quite strong consensus that the Calman recommendations are ones that we broadly support, but along the lines of the kind of vision that we have for a funding settlement for Scotland, the Scotland Bill does not do a bad job of attempting to translate that into legislation. I feel fairly confident in saying that that is a consensus position, although you will be able to find a union here or there that disagrees with particular aspects of our submission either on Calman or the Scotland Bill.

Q376 Chair: Are there any particular areas where you identify weaknesses, particularly in relation to accountability?

Dave Moxham: Our position on tax had been that between the level we are at, which I tend to think is more like 25% or 26% than 35%, and an upper level of anywhere up to about 50% of Scottish spend-of the 60% that is spent in Scotland-was a reasonable amount of money to look at in broad terms to maximise accountability while maintaining some of the single market social solidarity, broadly speaking, and the single welfare system that we advocate. We support the move on income tax. We would have been reasonably happy to see the assigning of some other taxation, as Calman suggested in his report might happen in future, but if that does not happen we do not see it as a kind of deal-breaker. That is our general view on taxation.

We believe that, on borrowing, Calman could have gone further, and probably the Bill could go further in a number of areas. Notwithstanding some of the difficulties that will probably be experienced, we favour the ability of the Scottish Government to raise bonds. I am just skimming over these on the basis that Members will probably come back if they have a particular interest in one of those areas. On the issue of welfare, where we would include council tax benefit and housing benefit, as well as potentially some limited areas of broader welfare policy, we see arguments in favour of devolution of those, or at least new arrangements to deal with them. They do not seem to be adequately covered just now in the Command Paper. That is a quick run-through of the areas. Members may want to pick me up on those or ask me about different matters.

Q377 Fiona O'Donnell: It is good to have someone here talking about the Bill in relation to ordinary working people in Scotland. You have probably answered the question I was going to ask. Is there anything that you are disappointed not to see in the Bill? Is there anything else you want to add that STUC would like to have seen in the Bill?

Dave Moxham: Something may come back to me in the next 20 minutes or so.

Q378 Fiona O'Donnell: Feel free to stop me. I want to talk about jobs and unemployment in Scotland. Scotland has rising unemployment. There are different predictions of how many jobs will go as a result of cuts in public expenditure. Certainly, the situation is less healthy in Scotland. From the point of view of tax, are you concerned that revenue in Scotland from income tax will fall disproportionately to that in England? Do you think that there are provisions in the Bill that will protect Scotland from that?

Dave Moxham: I think it is unlikely in the next period that income tax will necessarily fall more quickly in Scotland, in particular in relation to income tax compared with the overall spend comparison that people have talked about. In a sense, I think we are looking at a situation where over the past eight or nine years receipts have been significantly smaller compared with overall spend. That might flip in the next period, partially as a consequence of the recession and attendant difficulties. I do not see that as a problem, although I see unemployment as a significant problem, and there are things that I think we could do to deal with that.

Q379 Fiona O'Donnell: By the time we get to these proposals kicking in, hopefully Scotland will be heading in the right direction. Do you see any opportunities in the Bill to create employment in Scotland? I am thinking particularly of the construction sector, where there are probably the best opportunities for growth.

Dave Moxham: There are two things. One is the specific matter to which you allude. We would generally be looking for those borrowing limits in relation to capital spend from the loan funds to be up a bit. Maybe we could get a west coast project like the rail link out of it, as well as some east coast project. More generally, I think there is some value to be had in looking at the correlation between public spend in Scotland and how it can intervene in relation to employment. I think of areas like the Future Jobs Fund, which obviously was a scheme we supported; it ran up until June and was then discontinued. Certainly, the Labour party in Scotland, and possibly the SNP as well, are looking at schemes whereby the Scottish Government might intervene essentially to create six-month jobs. It seems to me that at the moment there are difficulties in respect of both the current arrangements and possibly in relation to the arrangements that the Scotland Bill proposes because, essentially, it is a kind of no-win situation. You spend quite a lot of your skills money or health money, or a combination of both of them, essentially to create short-term jobs to boost some skills and get some employment going, and all the immediate financial benefits accrue to the Treasury and DWP. There is something to be looked at in employment terms about how the Bill might better reward or find better mechanisms to deal with those decisions that a devolved Government might take to invest in order to meet unemployment.

Fiona O'Donnell: You will be pleased to hear that yesterday we did press the point with HMRC that if jobs were to be saved or created as a result of the tax proposals, those jobs should be in Scotland, so the headline will be "Scotland Bill saves HMRC jobs."

Q380 David Mowat: Overall, does your organisation support the direction of the proposals on income tax?

Dave Moxham: Yes.

Q381 David Mowat: So there is no ambiguity around that?

Dave Moxham: There is no ambiguity about our support for it. We could think of ways of improving it. We have certainly read of ways of improving it, but if you are talking of the overall direction of travel, we are content with it.

Q382 David Mowat: Are you concerned about the boundary issues, in terms of differential tax rates between England and Scotland, and how it is implemented?

Dave Moxham: If you are talking about the identification of the Scottish taxpayer, as identified in the Command Paper and various other things I have read, there are likely to be complications. That is likely to be a bumpy process. It does not seem to us-I apologise for not having the level of expertise that you will have heard from HMRC, accountants and others-to be so large a problem as to persuade us that the devolution of the tax itself is a bad idea.

Q383 David Mowat: As you said earlier, you are concerned about job creation. One point we talked about earlier was the fact that Scotland had a larger public sector as a proportion of its total economy than nearly all other parts of the UK. There is nothing in this Bill that will stop that continuing; indeed, it may be institutionalised. Do you see that as an issue at all?

Dave Moxham: Maybe you will explain to me how that will necessarily be institutionalised. I am not sure I understand how that would be the case. There was quite a lot of discussion in the previous session about the size of the public sector and its perceived effect on productivity. To be frank, the literature does not back up these suppositions in any case whatsoever. The bible as far as we are concerned is Lindert’s "Growing Public", volumes 1 and 2, which I am prepared to sign, even though I did not write them, because I have read them so much. Essentially, the literature suggests that there is no direct correlation whatsoever between public spending and growth either way. That is to say, you can find plenty of international examples of countries with high levels of public spending that have done well economically, and the opposite has been true. The Scandinavian examples roll off the tongue, if they need to be cited.

The point Lindert and other studies I have read make is that there is something about how public spending is exerted, and how you spend; spending on measures that will get larger participation from women in the labour market tends to be good for productivity. Having to spend all your money dealing with crime tends to be bad for productivity. It seems to me that there is a clear argument for making sure that the Scottish Government spends its money on the most productive areas. That is a far more important argument than the relative size of the public sector.

To give one final example, we had a five-minute debate here about the difficulties in relation to the planning system in Scotland. By all means we should definitely employ more local authority planners, as far as I am concerned. Were that the case, they would help to drive forward productivity. There are clear examples where the public sector is capable of driving productivity, rather than being a drag on it.

Q384 David Mowat: So your point, to summarise, is that it is not a public sector and private sector argument, but a productivity argument, and it would be perfectly feasible for Scotland to be as productive as similar economies if public spending was much higher?

Dave Moxham: Absolutely. The key economic dynamic to be addressed in the UK, if we are looking at all of these fiscal issues and sector sizes, is the relative prosperity of the south-east and London, notwithstanding pockets of extreme deprivation in London itself, and the rest of the country. Too much time is spent on the supposition that somehow Scotland is different from all the rest of the UK, rather than that very specifically a large number of areas are different economically from the south-east and London.

Q385 David Mowat: It is different potentially from other areas of the UK with levels of deprivation equal to Scotland because of the way the Barnett formula works, in that the level of spending is higher. But your point is that the public sector per se is not necessarily a bad thing, and the corollary, I suppose, is that you would think that you are equally likely to get productivity growth in the public sector as the private sector?

Dave Moxham: Indeed.

Q386 Lindsay Roy: Are there any other taxes you would like to see devolved?

Dave Moxham: I mentioned earlier the potential assignment of a somewhat larger basket. I am happy to talk about corporation tax, although the Chair made the points that I very much would have made on that. We did not identify any other tax that we thought should be devolved for the purposes of variation, as opposed to assignment. Obviously, income tax is assigned and variable. I have not looked in detail at the decision in the Command Paper on the Scotland Bill not to assign the savings element of income tax. I understand the argument is that that would be overly-complicated and there would be too much transaction cost. We would be prepared to look at that, but originally we had been in favour of the devolution of that tax, too. Equally, I am not sure that the arguments in relation to the decision on an aggregates tax and air tax necessarily stand up. I understand that they are both going through two different forms of process just now. I am not sure that it is not possible for those to be devolved to the Scottish Government and then for it to take its view on whether it also needs to make changes, pursuant to court action or other considerations.

Q387 Lindsay Roy: But there is nothing other than that?

Dave Moxham: There is nothing other than that. There are no biggies, if you like.

Q388 Lindsay Roy: You would accept, as Calman himself said, that this is a process rather than an event, so indeed in due course other things may well come up?

Dave Moxham: Yes. We heard reference at least to the block grant. I do not think that the issue of the Barnett formula has gone away for ever. It will return and when it does-there should not be any rush to do that-its replacement should be on a needs formula basis, but it might be necessary to look at that with a slightly wider basket of taxes at that stage. But I stress that we consider ourselves to be distinctly not in the camp of full fiscal autonomy. We do not believe that Scotland taxes and then buys services back. We are definitely not in that camp.

Q389 Mike Freer: We had a reasonably spirited debate about tax raising. Clearly, the guys from The Scotsman thought that politicians would only ever put taxes up. Do you share the view that tax raising inevitably leads to higher taxes and, therefore, leads to competitive disadvantage?

Dave Moxham: Essentially, there are two devolved taxes in the Scottish Government’s ambit just now, council tax and business rates. The small business bonus scheme is part of that. Both have been frozen or reduced by the Scottish Government in the last period. We disagreed with those decisions, but it seems to me self-evident that the direction of taxes is not just up when they are devolved. If anything, the voice in favour of the devolution of more taxes is being expressed more loudly by those who would lower them than those who would raise them.

Q390 Dr Whiteford: I would like to go back to those items of Calman which got left out of the Bill. I think about 35 of the 63 Calman recommendations have made it into the Bill. One of them that has appeared in a very watered-down form is the Crown Estate recommendations. Has the STUC taken a position on the Crown Estate and, if so, why?

Dave Moxham: Only very recently, by which I mean about yesterday afternoon, at the point of waiting to give evidence to the Committee of the Scottish Parliament, which we both did yesterday, I was very quickly briefed on the importance of the delivery of that service as close as possible to Scotland and was relatively quickly convinced that the best way to do that was in the way Calman had recommended rather than in the way the Scotland Bill does. If I had not been sitting next to Andrew at the time, I would have had to confess that we had not taken a view. We now have, and I am fairly confident that I can get the backing of my general council for that aspect.

Q391 Dr Whiteford: At the outset of your remarks you also talked about welfare and housing benefit, and council tax benefit in particular. I would be really interested to hear a bit more about that, not least because social landlords in Scotland are concerned that this Bill is pushing in the opposite direction and re-reserving powers that would have some significant implications for housing.

Dave Moxham: I am aware of the specific re-reservation relating to insolvency about which housing associations are concerned. Calman says that both housing benefit and council tax benefit are difficult because essentially they are passport benefits and you cannot necessarily see them out of the round, at the same time recognising that they have a clear relationship to policy setting in Scotland. Particularly in the context of the UK coalition Government looking to take forward the welfare challenges, I recognise that to an extent that relates to housing benefit, given that the UK Government are now saying that housing benefit will be grouped within the single benefit that they propose, the details of which we have not yet seen.

I was always slightly mystified about council tax benefit. I always thought, and still do, that council tax benefit is a kind of end calculation. Basically, you wait until everything else is calculated and then you find out whether or not you are eligible for council tax benefit and it does not play back into eligibility for other benefits. There was always a mechanism but it was suspended, slightly strangely, four or five years ago-I say "strangely" in the sense that there was no fanfare-whereby if the Scottish Government raised or lowered council tax it was recognised that that had a potential effect on the DWP and, if it was out of kilter with expectation, adjustments would be made to the block grant. That disappeared and I am not quite sure why. I think people began to touch on that argument when the Scottish Government put forward their proposal, which we opposed, for local income tax. But it is a good argument. If you chose, as I would advocate, at the very least to broaden the bands of the current council tax-it is not by any means a perfectly progressive tax but it has progressive elements-you would change its progressivity and the extent to which people on that band would then go knocking on the door of the DWP for their rebate. Not to have any relationship between that either by devolving it or coming up with a suitable mechanism to recognise the mutual effect on pots of money that those decisions have seems to me to be wrong and should be dealt with. I could go further and say that there may be areas in relation to the wider welfare budget itself to which that might refer, but I will stick there just now.

Q392 Chair: Perhaps I may follow up the point about consequentiality. There is already a provision in the Bill saying that in the event of Westminster deciding to alter tax bands, which would impact on the Scottish Parliament’s take from whatever it had from income tax levels, there will be a consequential payment, so they would not be adversely affected. There is the question of whether or not that would apply the other way round, if you transferred powers over rating valuations. The impact on the benefits budget is an interesting issue that may need to be explored as the next part of the process. I think you heard us indicate earlier that we would take the view that this is not static. It is not necessarily a one-way slide. It is an iterative process and some things will move backwards and forwards. Maybe we can come back to that.

Are there any other points we want to raise with the STUC? Most of us are pretty well aware of your positions, a lot of which are accommodated within Calman and then in the Bill. In a sense you are one of the groups that perhaps feel happiest about the progress already made on these matters. Do colleagues have any other points? As we said to the previous witnesses, are there any answers that you had ready to questions we have not asked you?

Dave Moxham: No, but I had hoped that, even if my answer was not perfect, I would at least be taken up on the issuing of bonds. While there are potential difficulties in respect of the underwriting and where the risks lie for those bonds, we have been very upset for a long period of time about the nature of the private financial initiative, the PPP and its successor. We are not particularly impressed by the Scottish Futures Trust as is. It is singularly nontransparent. In many cases they are just bad schemes. Even when the schemes have not been that bad, they have been hard to explain and understand, and hard for people to relate to. None of those are good things. We are therefore disappointed that, along with the other borrowing powers, there is not a specific suggestion that the Scottish Government should be able to issue bonds. I felt it important to raise that.

Q393 Chair: We had evidence from Professor Muscatelli and others yesterday. We have seen so many people that I am trying to remember who said what, but certainly people recommended to us that the borrowing powers should be increased. Are you drawing a distinction between additional borrowing powers-the ability to access more money-on the one hand and specifically bonds on the other?

Dave Moxham: Yes. I am saying I agree with Professor Muscatelli, or whoever else gave that evidence, that the width of borrowing power available under the National Loans Fund could do with a bit of an increase, but that the issuing of bonds, which is on a slightly different basis and essentially is similar to the sale of gilts, is a separate borrowing mechanism I would also support. All of these things would need to be prudential. We are not arguing that any of these things should be unsupportable on the evidence of the Scottish tax base, but as far as I am aware the issuing of bonds is different from availing yourself of certain financial loans.

Q394 Chair: I still do not understand this, and I think it is quite important. You have this position about bonds. Is that a way round what was seen to be a restriction on the amount that could be borrowed, and is the real issue for you that you want the Scottish Parliament to be able to fund more capital projects by getting access to more borrowed money, and you thought that if there was a restriction on their borrowing powers, bonds was a way round it?

Dave Moxham: Assuming the Scotland Bill or Command Paper as written passes into law, then within Scotland there will be three or four different borrowing powers. There will be the ones to which we have been referring. Local authorities will still be able to run bond issues as potential borrowing. In a sense, all we are saying is that with all those mechanisms which will be available in Scotland, that mechanism that is available in Scotland to other Scottish bodies should also be available to the Scottish Parliament.

Q395 Fiona O'Donnell: I read Professor McLean’s evidence to Holyrood on this. Why do you think local authorities in Scotland do not use bonds more?

Dave Moxham: My understanding is that it is largely because they still have to make a calculation based on the prudential code as to whether the issue can be supported by tax revenues or is the best way to go about funding a project and all the rest of it. There is still a load of restrictions. I do not argue that by passing over to the Scottish Parliament the power to issue bonds there would necessarily be a sudden rush to do it, because I think that in some circumstances it is quite likely you would pay slightly higher rates on borrowing than you would on other loans. It is a kind of additionality that has to be judged on the basis of the prudential code and therefore may not be used as much as it sounds, but is a power that Parliament should have available to it.

Q396 Fiona O'Donnell: Concerns were raised in Holyrood that less competitive rates might be achieved by the Scottish Parliament with these bonds. Is that a concern?

Dave Moxham: It is possible that those bonds would not be at quite as competitive a rate as some other forms of borrowing. I am not an expert on that; that is just from reading I have done. In a sense, that is a commercial and fiscal decision that has to be made.

Q397 Mike Freer: Is not the problem that any borrowing by the Scottish Parliament is ultimately underwritten by HMG and therefore is on the PSBR? That has always been a fundamental problem with local authorities, certainly in England, being able to issue bonds. The Treasury has always said no, because it breaches all their taboos.

Dave Moxham: I should add that that would still have to be subject to certain conventions and arrangements that allow the Treasury to take a view on the overall impact of borrowing.

Q398 Chair: That is right, which is why I did not quite understand-I confess I still do not entirely understand-whether or not there was any distinction between getting more money by issuing bonds and borrowing by other routes, because both of them would come under the national deficit figures. If there is something I am missing and there is an advantage in doing it by the bonds route rather than the loans board route, no doubt the staff will tell me by the next meeting and I will share this with all of you.

Maybe we can now turn to Mr Wightman. I apologise for keeping you so long. The whole question of the Crown Estate Commission in Scotland is an issue that has arisen fairly late in the day as far as we are concerned. We did not realise that it had behind it the steam that clearly it has. We therefore apologise for giving you relatively short notice in inviting you down. Indeed, if you had known that there were no copies of your book available south of York, you could have brought some with you on your way down. Will you start off by telling us a little about the work of the Crown Estate Commission in Scotland and why the existing system does not work properly?

Andy Wightman: Thank you for the invitation, Chairman. As I laid out in my written evidence, there is a wide variety of Crown property rights in Scotland. For historical reasons, some are still administered by the Crown Office in Edinburgh, as they always have been since the monarchy of 1,000 years ago. Others, principally the Crown Estate, went south from the Baron Court of the Exchequer in 1832 and have remained there. At one level what we are talking about is a bundle of property rights, some of which are of quite significant economic importance, like the rights over the seabed and the foreshore, where essentially the argument is about governance and accountability. At the moment the Scottish Parliament has all the powers of planning, environmental regulation, et cetera, over these areas but does not administer the property rights itself.

I would also clarify the fact that the property rights themselves are devolved. In 2000 we abolished the Crown’s paramount superior which was parts of the Scots law of property then. So the Scottish Parliament could actually legislate over these Crown rights if it wished. The concern over a long period of time-and I think you have heard evidence from a number of witnesses-is that the impact of the way these rights have been administered has been a bit haphazard and that people who want to do fairly modest things on the foreshore, or a small harbour that wished to extend a breakwater, find themselves in a very tangled process. They talk to the local authority about planning and things, they talk to other Government agencies about environmental controls and then the Crown Estate Commissioners come along and say, "We administer the rights over the seabed and we want to charge x, y and z." They come in at the last minute and it is a bit of a surprise. There are governance issues around harbours, for example. It seems strange that a harbour should not have complete control over the seabed of that harbour. I think the issue is about governance and accountability, and always has been. The Scotland Bill presents the opportunity to improve the governance and accountability, principally through, in my view, the removal of the Crown Estate Commissioners from their current role in administering these rights.

Q399 Chair: I can see the point about accountability, but you suggest that the existing system does not work adequately. If the existing system works fine and there is really no problem, then accountability would just be a nebulous concept for anoraks and the like. Maybe you can give us a few more examples of why something needs to be done.

Andy Wightman: I will give you a couple of examples. Back in 1999 just at the dawn of devolution the Scottish Law Commission initiated a report into the law of the seabed and foreshore. It published a report in 2003. Nothing has ever happened to that report, but it identified conflicts, for example, between the Crown’s role as proprietor of the foreshore and the Crown Estate Commissioners’ role in administering those rights and, on the other hand, the Crown’s role as the guardian of the public rights over the foreshore. There was a potential conflict between these two different sets of rights. At the moment that is resolved by a group of unelected commissioners sitting in London. There are other examples.

Q400 Chair: To be fair, that is accountability and I can understand that, but in practice are there things that would have happened that have not happened as a result of that process and structure?

Andy Wightman: Yes, there are.

Q401 Chair: That is really what we are after, in a sense. I can see the flaws in the system, but if it is working fine to everybody’s satisfaction there is no need to do anything. Clarify for us what is wrong.

Andy Wightman: For example, there was one island community in the Orkneys that wanted to put in a tidal barrage or whatever. The costs involved, just in terms of renting the seabed, were disproportionate to any benefits they would receive. There have been issues about laying a subsea cable from the Northern Isles, Orkney and Shetland, to the mainland. Again, the Crown Estate Commissioners have come in and said they want their pound of flesh, which makes the economics of the whole thing crazy. We are talking about property rights that are a fundamental part of the infrastructure of the country. You have people whose principal concern seems to be to maximise revenue generation even though that is not their statutory purpose. You have another set of people in local authorities and private businesses who want to get on and develop their economy and businesses and find stumbling blocks.

Q402 Chair: I want to ask you about a couple of things in your evidence that I do not understand. The third sentence of paragraph 4 on the first page reads: "Responsibility for the property rights themselves is devolved and it is within the competence of the Scottish Parliament to legislate to amend or abolish any of them." Surely, in that case the Scottish Parliament already has the power to deal with all of this. If we take the example of renting the seabed for the Orkney breakwater, can the Scottish Parliament not deal with this by legislation?

Andy Wightman: The Scottish Parliament has the power in the sense that schedule 5, paragraph 3(1) to the Scotland Act does not reserve property rights of the Crown. In theory, the Scottish Parliament could, if it wished, abolish the Crown’s right to all naturally occurring oysters tomorrow. That would be unproblematic. When you get into things like the seabed, actually doing that becomes a bit problematical. There are various issues involved.

Q403 Chair: Why? If you are right and they have the power to do that, why do they not just do it?

Andy Wightman: Because that is far, far too complicated and that is not really the issue. The issue is not whether or not these are Crown rights; let’s just leave them alone. The question is: who is administering them and benefiting from the revenues?

Fiona O'Donnell: That was what I wondered.

Q404 Chair: I think we need to be satisfied-I am not at the moment-that this is the only way to deal with it. I want to clarify whether or not the Scottish Parliament already has sufficient power to deal with this matter by another route.

Andy Wightman: I do not think so because, for example, there is a view within the Scottish Government, which has not been made available to me because it is in the nature of legal advice, that being able to use those powers over the property rights could be problematic. The simplest thing to do to improve accountability and governance is to bring back the administration.

Q405 Chair: I understand that point. You say "could be problematic"; that sounds like lawyers-

Andy Wightman: Forgive me, I am not a legislator. I am told that if you want to legislate over the Crown rights to the foreshore it is a complicated legislative thing to do because you are dealing with archaic rights. We actually do not know the extent of the foreshore that is Crown foreshore as opposed to private foreshore. You get into all sorts of issues which we do not have the time or will to get into. The key thing is: who is administering that foreshore and how accountable are they? Let’s leave the rights as they are, unless we want to abolish naturally occurring oysters or whatever. These are modest things.

Q406 Chair: I understand your point about "devolving". I just want to be clear: if the powers are devolved, how do you know what powers they would be devolving when ownership is unclear?

Andy Wightman: There are arguments all the time. This is one of the reasons why I think the Crown Estate Commissioners should be removed from the picture. For example, in Selkirk and the Borders the salmon fisheries were always regarded as the property of the borough, as part of the common good of the borough of Selkirk. The Crown Estate Commissioners’ view was, "Well, you prove it." That tends to be their view on all sorts of issues to do with property rights, for example, on the foreshore. The burden of proof is on the landowner or community to show that these are not their rights.

Q407 Chair: I see. The assumption is that everything belongs to the Crown Estate unless somebody can prove otherwise.

Andy Wightman: Yes, and that has caused huge problems.

Q408 Chair: That is perfectly clear. Is it within the powers of the Scottish Parliament to have said, "No, we are changing that so that all of it is somebody else’s-ours-unless it is proven otherwise?" That would allow the whole thing to be dealt with in another way.

Andy Wightman: The Scottish Parliament could theoretically legislate over these property rights. Yesterday Wendy Alexander of the Scotland Bill Committee asked me to put firmly in the record my authority for that and I cited the schedule to the Scotland Act. I also cited the Scottish Law Commission’s report on the law of the seabed and foreshore. She observed that they had contrary legal advice. In other words, there are lots of issues about legislating over the property rights. I merely raise the issue because one should be clear about what one is talking about. For example, the other day the chief executive of the Crown Estate Commissioners in the Scotland Bill Committee claimed that the commissioners were the landowner. They are not. The Crown Estate Commissioners own some paperclips and bits of paper and desks. They own nothing and merely administer Crown property rights, which in Scotland are distinct from England. There are Crown property rights in Scotland like salmon fisheries that do not exist in England because the two monarchies developed in parallel for a long, long time.

Q409 Fiona O'Donnell: Where does the money go?

Andy Wightman: Currently, the surplus revenues are handed over to the Treasury and the Crown Estate Commissioners under the 1961 Act are accountable to the Treasury.

Q410 Fiona O'Donnell: So it just goes into the general pot?

Andy Wightman: Yes.

Q411 Chair: To be clear, everything the Crown Estate Commissioners have throughout the whole of the UK goes by the same route and then disappears into the Treasury pot.

Andy Wightman: Yes.

Chair: Presumably, it is counted as part of the income which is then disbursed through Barnett in proportions with which David might disagree. We just want to be clear about that.

Q412 Dr Whiteford: Obviously, these are issues close to my heart representing, as I do, a very long stretch of coastline. I know from my own experience that this not only holds back development all around the coast but causes damage to our cultural heritage where harbours have been abandoned to rack and ruin, as in Crovie, for example, because of the Crown Estate’s intransigence on these issues. My question to you would be: is the Scottish Government the best place to deal with this? Can you say a bit more about why you think devolving it, in essence, would be the best way forward? Maybe you would pick up Ian’s point. In your view, is the Scotland Bill the easiest way to get round this problem?

Andy Wightman: The strongest argument for devolving this is that at the moment all Scottish Crown property rights are administered by different bodies. The Scottish Government and the Crown Office, acting as partners, administer some. The Crown Estate Commissioners in London administer others. I think it would be very beneficial if we brought all property rights together in Scotland to be administered by whatever body is deemed the most appropriate.

The second reason is that the Scottish Parliament already has all the powers for planning, marine planning and environmental controls, et cetera. In other words, it has all the responsibilities and the costs of administering the planning regime and the environmental regulation regime at sea, but does not get any of the revenues because another body comes and takes those. I also think there is an issue about potential discordance between the Scottish Government and Scottish parliamentary objectives in relation to the Crown Estate and the objectives of the Crown Estate Commissioners. Again, the chief executive the other week said that at the moment their objectives and the Scottish Government’s were happily aligned, but, as the representative of Orkney Islands Council said in evidence yesterday, that will not always be the case. For example, if the Crown Estate Commissioners wanted to slow down renewables to maximise revenue by controlling the market and access and the Scottish Government wanted to speed it up to boost its carbon-saving targets there would be a huge discordance between those two. That is why I think it is best to bring them together.

The reason why I think the Scotland Bill is the best way to deal with it is that the Crown Estate Commission is a reserved matter. The 1961 Act that gives them the powers is a reserved matter. If one felt it was appropriate to devolve the administration of these rights, it would be a very straightforward thing to do by a one-line amendment of the 1961 Act. I think the Scottish Government has come forward with a proposal to remove a couple of the schedules of the Scotland Bill, so it is a fairly straightforward thing to do. There are also other options. A former Member of this House, Calum MacDonald, has put forward a model on the lines of the Forestry Commission. Calman made recommendations on the power of direction that have not been taken up here. That could be handed over to Scottish Ministers to exercise the power of direction. Even Professor Calman and his adviser, Professor Gallagher, last week, I think, mentioned to you the proposal for a Scottish commissioner, which really does not take us very far forward. I would observe that since 1962, every single chairman of the Crown Estate Commissioners has been a Scot. Last year is the first year since 1962 that we have not had a Scottish chairman, so it is and always has been a very Scottish body. The idea that this just becomes put on a statutory footing really changes nothing, unless a Scottish commissioner has statutory powers and obligations to represent the Scottish interest, as opposed to just being somebody who knows the conditions in Scotland.

Q413 Dr Whiteford: I was going to ask whether you thought the proposals in the Bill as it stands would make any difference at all, but I think you have just answered that.

Andy Wightman: With all respect, Professor Calman and Jim Gallagher themselves have said they do not think there would be much difference, and that there was a debate to be had and we should have more time to explore this.

Q414 Chair: That is right. That is the other issue I want to pick up with you. I was speaking to one of my colleagues who is a strong supporter of the coalition and who indicated that a lot of this in the Scotland Bill was a done deal and it was highly unlikely that they would unpick any substantial elements of it. I wonder whether or not Calum MacDonald’s proposal, or anything similar, offers a half-way house, given that this is an incremental move in relation to the Crown Estate Commissioners and is not something that has been high on the political agenda and there not much of a head of steam behind it. I understand where you want to be eventually. Obviously, it is for the Committee to decide, but I am looking to see whether or not when we make recommendations something moves us in that direction that might be acceptable.

One thing that strikes me is that simply transferring powers to the Scottish Parliament-Brian Wilson makes this point-does not overcome the difficulty of wanting to involve local authorities or communities in it. I wondered whether or not it would be a step forward, if not everything that you seek to achieve, if we looked at some fallback whereby the Crown Estate Commissioners had to produce a yearly report to us or somebody similar and have a memorandum of understanding which meant they had to outline how they were linking with local communities and so on. Is there something like that by which we can take things forward? Is there something like that through which we can take things forward? I fear that if we start to try to unpick the Scotland Bill altogether, those outwith the Committee will just say, "No. We’re rolling forward nonetheless." Our degree of flexibility is limited. What could we do that would be helpful within the constraints?

Andy Wightman: That is a good question. As I have just indicated, there are a number of options which would improve accountability. I think that accountability and governance is the key issue because it is about aligning public policy in Scotland with regard to development of the marine areas, the foreshore and all the rest of it-all those policies are made in the Scottish Parliament and exercised by Scottish Ministers-with the administration of the property rights that enable those goals to be achieved. Anything that can improve that will be a step forward. Calum MacDonald’s suggestion of a Scottish commissioner chairing a national committee would be extremely helpful. The contrast between that position and the Forestry Commission, of which he has experience, is that of course forestry policy is devolved, so the Scottish Parliament can pass a forestry Act. It cannot pass an Act on the Crown Estate. The fact is that the Forestry Commission, although it is a hybrid, cross-border body and still a GB body, is directly accountable to Scottish Ministers for all its operations in Scotland. You could put in a clause to suggest that the Crown Estate Commissioners should follow the lead of the Forestry Commissioners and be accountable for all their activities directly to Scottish Ministers.

We could put in proposals about the power of direction which, as Michael Moore said the other day, has never been used and is rather a nuclear option, which begs the question: why have it in the first place? Nevertheless, that could be exercised by Scottish Ministers or the national committee of Calum MacDonald. Anything that would improve accountability and allow people to have a place where they could have discussions about how the Crown Estate is being administered and what the future holds would be far, far better, because, at the moment, that is not happening at all. One thing that would help would be a formal review. There has not been a formal review of the Crown Estate Commissioners’ functions and duties since 1961, and that is an awfully long time ago.

Q415 Chair: In Scotland?

Andy Wightman: In the UK.

Q416 Chair: I thought the Treasury Committee produced something last year.

Andy Wightman: They had an inquiry. It was not a formal review. They produced a very good report in a very short space of time but it was not a formal review.

Q417 Chair: What would a formal review include that the inquiry did not?

Andy Wightman: It would have much, much greater depth.

Q418 Chair: The difficulty for us is that life is short and there are lots of things to do. There is a limit to the amount of time we can get for any parliamentary body to undertake a review, unless we got somebody like the National Audit Office to do it or something like that. I am just struggling to think of ways in which we could move this forward. Before finishing that point-I will move to another one in a moment-on the whole question of land reform, about which you have written in your book that is not available south of York, the Scottish Government have power to do lots of things relating to land reform that have not been taken up at the moment. Is that correct?

Andy Wightman: The current Scottish Government have not done a great deal.

Q419 Chair: If the current Scottish Government have not done a great deal, which is what I thought, how do you know that transferring accountability to the Scottish Parliament will make much difference in real terms?

Andy Wightman: Because the harbour in Dr Whiteford’s constituency, the fish farmer in Skye and the Kirkwall Harbour Board, instead of dealing with an unaccountable body of commissioners in London can speak directly with a Minister in Edinburgh.

Q420 Chair: What is the advantage of being ignored by somebody close to you as distinct from being ignored by somebody far away?

Andy Wightman: That is practice. If Ministers in Edinburgh choose to ignore them, that’s fine. The point is that it is much more likely that issues will be resolved if they are resolved in a place that has proper accountability.

Q421 Chair: You told us earlier that the powers of the Scottish Parliament over land reform have not been used.

Andy Wightman: I do not think that has anything to do with it.

Q422 Chair: I do see some similarities between land reform and the Crown Estate Commission. If it is not on the agenda and the powers they already have on land reform have not been used, how do you know that if they got the Crown Estate Commission powers they would use them adequately? That is why I am also thinking about what other things we can do to take this forward, like the question of asking them to produce an annual report which would then be the subject of questioning and so on.

Andy Wightman: Take my small fish farmer or crofter in Skye. They just want to do something pretty simple on the foreshore. In many cases that becomes an insurmountable hurdle because of the way the rights are currently administered. A crofter in Skye should be able to go to his local authority and get a letter of consent in a matter of weeks. It is about efficient public administration of these public rights and that will yield economic benefits.

Q423 Chair: That is an argument for devolving it to local authorities.

Andy Wightman: We should devolve it beyond Edinburgh, but I think it would be beyond the scope of the Scotland Bill to come forward with a programme of how that might work, because that gets us into all kinds of further details. My proposal is that we simply remove the Crown Estate Commissioners as a reserved power so that it becomes devolved. We then have a debate in Scotland as to how these rights should be administered in Scotland. In some cases we will probably just abolish the mussels and oysters. The rural estates could probably go to the agriculture Department, or the tenant farmers might want to buy them. The foreshore and seabed could go to Marine Scotland with limited autonomy for local authorities, et cetera.

Q424 Chair: That brings me back to the very first point I made to you. I thought you were saying that the Scottish Government had powers over these things anyway.

Andy Wightman: The Scotland Act does not reserve Crown property rights, so the Scottish Parliament could, if it wished, legislate on those rights. It has chosen not to do so but it could do if it wished. The Westminster Parliament can legislate over the Crown Estate Commissioners, the people who administer these rights. All I am talking about is bringing the administration of those rights closer to home.

Q425 Chair: Maybe I am slightly confused about the distinction, which seems to me to be artificial, between the property rights and the administration thereof. If the Scottish Parliament could have the power to say that the property rights of oysters would be transferred to the Scottish Ministry of agriculture, then presumably that is the matter dealt with.

Andy Wightman: The problem behind all this is the fact that the issue about the Crown Estate Commissioners has been one of long-standing concern in many parts of Scotland, principally in the north.

Q426 Chair: I understand that.

Andy Wightman: It is not so much the question of the property rights and all the rest of it. One can debate that another day. The issue has always been one of accountability and who is responsible for this. As Calum MacDonald makes clear in his evidence, it was always very difficult to find a Minister who would take responsibility for this. Therefore, all sorts of things that could go on in his constituency that he wanted to see happen were not happening.

Chair: We are going round in circles. I think we will have to try to identify whether or not there is another way of skinning the same cat, as it were. I do have some doubts as to whether or not the Minister will be minded to unpick part of the legislation when a coalition of interest has been assembled on the basis of what we have there. That was why I was particularly keen to see whether or not there was another route by which the same objectives could be achieved. Maybe we will consult with you privately and so on to see whether or not there are other things we can do. Maybe we will also speak to the Minister when he comes before us to see what his inclination is.

Q427 Mr Reid: Thank you for coming along. We have covered a lot of areas, but I have just a couple of points that I want to bring up. One of Calman’s reasons for not recommending the devolution of the Crown Estate Commissioners was that only 5% of the Crown Estate’s income UK-wide was generated in Scotland, but Scotland’s share of UK public expenditure was higher than that. Therefore, if we take the whole of the Crown Estate’s money that comes in UK-wide and work out the proportion of that spent in Scotland, getting only 5% seems a bad deal. I wonder whether you have any response to that.

Andy Wightman: I am sorry. You say "getting only 5%".

Mr Reid: Calman makes the point that only 5% of the Crown Estate’s profits UK-wide come from Scotland, but that Scotland’s share of UK public expenditure is higher than 5%. It would seem that if Scotland is to get only 5% of the Crown Estate’s profits rather than what we get through Barnett it seems a rather bad deal for Scotland.

Andy Wightman: I have not done the arithmetic, but over the past 10 years or so the average net revenues from Scotland run into about £10 million a year, so we are talking about a differential of 2%, perhaps £200,000.

Q428 Mr Reid: For Scotland it is £10 million?

Andy Wightman: Last year it was £9.1 million.

Q429 Mr Reid: David probably has the exact figure, but if we say that Barnett, in round terms, is 10%, then 5% of £10 million would be £500,000.

Andy Wightman: Which is insignificant in the bigger scheme of things, frankly, with a block grant of £32 billion or whatever it is. That is an argument that the Crown Estate Commissioners have used politically to head off reform. My argument, fundamentally, is that if you bring the administration of these rights closer to the people whose livelihoods depend on them-I am talking beyond the Edinburgh Parliament and down to local authorities-they will make decisions more efficiently, quickly and in a more integrated manner with other public policies. Therefore, you will get much greater benefit out of the Crown Estate than you do at the moment where, by and large, the Crown Estate Commissioners ignore vast areas of the estate and are not responsive to its development at all.

Q430 Mr Reid: Do you feel that is worth £500,000?

Andy Wightman: Hugely. Take my admittedly speculative and hypothetical example where the Crown Estate Commissioners want to go at a certain pace on offshore renewable development and the Scottish Government want to go at a faster pace, which included a lot of community organisations that wanted to get involved in it and could earn substantial amounts of money. The difference between the Barnett consequentials and the net revenues that come from Scotland will be minuscule in comparison with the economic advantages that would accrue from having greater control of the resource and being able to develop it in ways that better match public policy.

Q431 Mr Reid: In that particular situation, under existing legislation could the community right to buy be invoked?

Andy Wightman: The community right to buy is in part 2 of the Land Reform (Scotland) Act which allows communities to register an interest in land and acquire it if and when it comes on the market, so it is not practical, in the sense that the Crown Estate Commissioners, although they have the power to alienate the seabed and foreshore, are very unlikely ever to do so. The community in Orkney that I mentioned which wanted to develop a tidal barrage with a very fast-flowing but narrow tidal stream between it and the mainland of Orkney could not do it through that measure because Scottish Government officials said that the community right to buy did not apply to the seabed.

Q432 Mr Reid: But could the Scottish Parliament legislate to transfer that land to the local community?

Andy Wightman: No, they could not, because at the moment the Crown Estate Commissioners are the people charged with the administration of Crown property rights. They are the ones who buy, sell, lease and all the rest of it. Scottish Ministers cannot do any trading in Crown property rights by way of lease, sale or anything like that.

Q433 Chair: I thought the exact wording of your evidence was contrary to that. You were referring to the responsibility for the property rights themselves and so on.

Andy Wightman: The legislative responsibility for the property rights is devolved, so the Scottish Parliament can legislate over the nature and extent of these rights in terms of property law.

Q434 Chair: Presumably, they can abolish them.

Andy Wightman: It could, in theory, abolish them, but Mr Reid’s point is whether they can trade them and act as the landowner. They cannot because at the moment those rights are administered by the Crown Estate Commissioners under the 1961 Act. If I were a trustee of my grandchildren’s trust, for example-I am not-I would be acting on their behalf and I could buy and sell shares, land, et cetera with a view to maximising their estate, but I could not do anything with respect to trust law. I could not change trust law. It would be up to Parliament to do that.

Q435 Mr Reid: To take a simpler example, if someone wants a fish farm, under the present devolution settlement can the Scottish Parliament pass legislation that says he can have that fish farm?

Andy Wightman: No, because the property rights are administered by a reserved body. The only body that can grant a licence or lease over part of the foreshore or seabed is the Crown Estate Commissioners. Nobody else can execute that transaction.

Q436 Chair: Abolishing the monarchy and then abolishing the Crown Estate Commissioners would seem to be the only way.

Andy Wightman: I have said nothing about abolishing the monarchy.

Q437 Mr Reid: Another argument that Calman gave, in 5.116, for not devolving the Crown Estate is that the Crown Estate has flexibility to make investments in Scotland using capital raised from assets outside Scotland, which has been a key enabler, for instance, in its ability to work in partnership with the Scottish Government in the development of offshore renewable energy. Do you agree with Calman’s statement?

Andy Wightman: No, I do not agree with Calman’s statement on that. With respect, the Crown Estate Commissioners did quite a fine job in influencing the outcome of Calman. They were perfectly entitled to do that but, as a consequence, some statements like that came out. Over the past 10 years, since devolution, the total net revenues from the Crown Estate in Scotland are of the order of £100 million, which is £10 million a year. Last year, or the year before, Princes Exchange in Edinburgh, which is a big commercial property, was sold for £60 million. So about £160 million of revenue is coming from Scotland. In the past five years-this is from the Crown Estate Commissioners’ own background briefing in one of the recent agendas on the Scotland Bill in Holyrood-its total investment had been £16 million. They are not investing anything like the kinds of proportions that they suggest they either have or might do in the future, because their function under the Crown Estate Act is to manage and turn to account land and other property rights and interests, et cetera, and hand over the net revenues to the Treasury. They have been a key enabler because they have had monopoly control over the seabed. Nobody else has been in a position to be an enabler because it is a monopoly position.

It is interesting that a lot of the offshore renewable industry is quite unhappy with the Crown Estate Commissioners, but none is willing to put their head above the parapet. This is a serious problem, because they are all dependent on it. There is no alternative landowner of the seabed. If the seabed was parcelled up like Scotland and England in the UK, among many, many landowners people could say, "Well, I’ll come to you and you get me a better deal", or whatever. It is not like that; it is a complete monopoly, which is why it is even more important that it comes under a much more inspired and accountable regime.

Q438 Mr Reid: And you feel that is Scottish Ministers.

Andy Wightman: Yes, the Scottish Parliament and Scottish Ministers, very much like the Forestry Commissioners. The Forestry Commissioners are accountable to Scottish Ministers for the management of the national forestry estate in Scotland, which is owned by Scottish Ministers, and the Parliament has legislative authority over forestry as a devolved matter.

Q439 Mr Reid: But would you prefer it to be under the control of local communities?

Andy Wightman: Yes, I prefer that. My small chap in Skye who just wants to put in a little breakwater for a local shrimp operation or whatever would do it tomorrow if he could.

Q440 Mr Reid: Your objective is that the seabed should be under the control of local authorities and communities. Am I right in saying that you see devolving it to Scottish Ministers as only the first step and you would hope that the Scottish Parliament would then further devolve it?

Andy Wightman: That would be my goal, yes.

Q441 Chair: We would see it as a process really, with the devolution of powers from Westminster to the Scottish Parliament and then down to local authorities, rather than just stopping half-way through.

Andy Wightman: Absolutely.

Q442 Chair: I am not sure I entirely understand what you are saying to me about the distinction between property ownership and property rights. No doubt those on the staff who do understand these things will come back and inform us. This has been very helpful to us. We are approaching this entirely cold. Eilidh raised it in the first instance, and a number of people have submitted evidence. Obviously, we will speak to Government Ministers and others and see whether or not there is much scope for changing the nature of the Bill. However, if we get signals that that would not be likely, there is little point in our making a recommendation that will crash to glorious defeat. In these circumstances we may come back to you and ask you whether or not there is anything that could be an improvement on what is being proposed in the Bill that we might find is acceptable to the Minister and coalition.

Andy Wightman: I do not quite understand that. Do you mean you would leave the Scotland Bill as it is?

Q443 Chair: If Ministers are not willing to accept a change rather than simply accepting what they have, are there other things we could do? For example, I raised the question of asking the Crown Estate Commissioners to produce an annual report indicating what they have done in Scotland, so that if we cannot manage accountability through one route we try to manage it through some other.

Andy Wightman: Through policy and practice.

Q444 Chair: Absolutely. I am not entirely clear what the alternative might be. I accept, as I think most of my colleagues do, that we would not want the status quo to continue. The Government are making a proposal that, unless I am mistaken, quite a lot of people feel is inadequate. If, however, they are not prepared to budge from that, are there other things that they might be prepared to accept? We might want to explore those.

Andy Wightman: If I may make an observation on that, I think it is unlikely because this issue is governed by statute, by reservations in the Scotland Act, the Crown Estate Act and all the rest of it. Outwith that legislative framework, there is very little room for manoeuvre. The Crown Estate Commissioners have already said they will come to the Scottish Parliament and produce reports and all the rest of it. That is all very well. That’s fine. They could resurrect the Scotland Office and have separate sets of accounts.
There is no doubt that all of that would be very helpful, but it would not take us a great deal further forward.

Chair: I understand that. We are in the market at the moment for something that is helpful on the understanding that what is decided in this round of legislation is not the end of the road for ever. It is a question of taking steps. Until a relatively short time ago most of the Members of the Committee were not aware this was an issue. I still think that for the vast majority of MPs out there days, weeks and years will pass without any consideration of the Crown Estate Commissioners. Therefore, the prospects of bringing about a big change are not high. The opportunity to turn over the Government is not great, in my view, and it is a question of whether or not we can identify other things, like the question of reports and so on, that might take us some way down a road that would build up a greater head of steam to have changes made at a later stage. Eilidh, you brought this up. Maybe you will not get the whole biscuit, as it were, and it is a question of whether or not we can achieve anything at all.

Dr Whiteford: I suppose I concur with what Mr Wightman says in the sense that tinkering around the edges of this does not alter the fundamental issue. There is a real opportunity in the Scotland Bill to improve it by devolving this properly and it would be a shame to miss it.

Chair: I think we need to be clearer about the position of the Secretary of State and Government, if only we had somebody who can speak for them. [Interruption.] On that note, there is a vote in the Commons. My timing is perfect. Thank you very much for coming to see us.