The Scotland Bill

Written evidence submitted by Scottish Financial Enterprise

Scottish Financial Enterprise represents Scotland's financial services industry. It is funded by its members, which are drawn from all sectors of the industry as well as from professional bodies, educational institutions and public sector interests. Common to all members is an interest in promoting and supporting the continued success of our industry in Scotland and around the world.

General views on the Scotland Bill

As an industry we appreciate the fact that a lot of work has been carried out to reach this stage of the Scotland Bill. We welcome the fact that we have been asked to participate in the process.

Where powers sit within the UK constitution is a matter for voters and their elected representatives. It is the exercising of those powers, once allocated, that can affect the prospects for our industry’s competitive position, its continued success and its continued contribution to Scotland’s prosperity. We believe it is important to contribute to debates on how powers are used, since impacts can be judged and calculated; but debates on how they are distributed between different legislatures, we leave to others.

The objective for all governments, in an open economy like that of the UK, should be to help create the conditions to improve the competitiveness of financial services. It follows that we would always be concerned by any policy proposals that may bring additional cost to our industry and thereby undermine our competitiveness within the UK and internationally; or make it more difficult to serve a customer base drawn from the whole of the UK. These will be the touchstones for our examination of proposals to exercise tax powers, at all levels of government.

Content of the Bill

We think it would be valuable to clarify the scope and meaning of the Bill in a number of areas.

The new section 80B of the Scotland Act, provided for in section 24 of the draft Bill, appears quite widely drawn. It seems to allow Her Majesty, by the passage of an Order in Council, to add any kind of tax (‘a tax of any description’) to the list of devolved taxes (and thereby devolve them). It also appears to provide for her to make any other changes she sees fit, to any other enactment, in accordance with what She (or Her Government, in practice), considers ‘necessary or expedient’.

This very broad power appears to allow any tax to be devolved, at any time, by the relatively discreet mechanism of an Order in Council.

It also seems to open up the possibility not only of taxes being introduced in Scotland that do not apply at all in the rest of the UK (as recommended by the Calman Commission) but also additional taxes on activities or incomes already taxed at UK level.

These proposals therefore seem, to the inexpert reader, to go further than those of the Calman Commission as generally understood. While we have no view on where taxation powers are assigned within a constitutional framework, for the reasons outlined above, we think it is important that the extent of the changes introduced by the Bill are clear and understandable, not least for reasons of accountability and transparency. We therefore invite the Committee to explore the precise scope of these powers in more detail.

It is also very important, in our view, that HMRC should be responsible for identifying and tracking Scottish Income Taxpayers, in so far as that is made necessary by the provisions in the Bill. They are best placed to do this. The Association of British Insurers make this point clearly in their submission, which we fully support.

Conclusion

The UK, and Scotland in particular, needs to grow its economy. Private businesses will lead that growth; but government policy, at all levels, should not only encourage the retention of existing businesses but also the attraction and support of new ones.

February 2011