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Lord Sewel: I am grateful to the noble Earl for giving way. Her Majesty's Government are prepared to accept the authority of the jottings of the noble Earl's predecessor.

The Earl of Mar and Kellie: I thank the Minister for his kind acceptance of that point. I shall of course withdraw the amendment. The Parliament of 1707 by now has gone, like yesterday. I did not wish to reproduce a parliament made up of lairds, burgesses, on occasion, bishops, and Peers, although I suppose that the hereditary peerage--I think that my noble kinswoman Lady Saltoun of Abernethy was intending to contribute on this aspect--would produce some members of a re-created parliament of 1707. I do not want that. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Lord Strabolgi): I have to inform the Committee that if Amendment No. 4A is agreed to, I cannot call Amendment No. 5.

Lord Simon of Glaisdale moved Amendment No. 4A:

Page 1, line 6, leave out ("and tax-varying powers").

The noble and learned Lord said: It falls to me to move the first of a series of amendments to be spoken to in conjunction with it referring to the taxing capacity of a proposed Scottish parliament, and, generally, to finance. I tabled the amendment as an alternative to one already proposed and also to the wording in the Bill. With reference to the Deputy Chairman's observation, I do not intend to ask the Committee to divide on the amendment or the subsequent amendments in my name.

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My objection to the Government's phraseology is that it is much too vague. On the previous amendment I drew attention to the fact that there is a joker in the pack--a body of persons who are willing to drive home the Bill, while willing to see the slide down the scale, and to exploit any vagueness.

I have a feeling--I hope that it is not due merely to the unpleasing cynicism that comes with years, both calendar and parliamentary--that we are having the second question about varying taxation because Mr. Blair got into trouble when he made his foray into Scotland. The term "varying taxation" can mean anything or nothing. Taxation includes VAT and Customs and Excise as well as income tax. Income tax itself contains a great many matters. The prime duty of Parliament is to put perfectly clear and understandable propositions to those who are invited to vote.

Amendment No. 4A leaves out the phrase, "and tax-varying powers", and Amendment No. 8A adds the words:

"with limited power to raise or lower basic rates of income tax".

I think that that is what is proposed for the Scottish parliament. I am reinforced in that view as I think that it was in the mind of the Scottish Constitutional Convention, although, again, I speak in deference to the noble Baroness, Lady Ramsay, and the noble Lords, Lord Ewing and Lord Steel. I tabled the amendment in preference to the amendment put forward by the noble Lord, Lord Mackay of Ardbrecknish, the noble Earl, Lord Lindsay, and my noble friend Lady Saltoun, which merely inserts the word "income" before the word "tax". That is an improvement but it does not go far enough. Income tax covers, for example, allowances and tax avoidance. I believe that it would be disastrous to have a different Customs regime north of the Border. It can only cause confusion if we have marginal matters of income tax, tax avoidance, tax allowances, and so on, differently dealt with.

The amendment of my noble friend Lord Perth relates to the power to raise or lower taxes. It is many years since I first met my noble friend Lord Perth. He was brought in with another eminent Scot to give counsel to the Treasury on a matter where there was a distinct difference of departmental opinion. Ever since then I have held him in the highest respect, but I do not think it is going far enough merely to say "raise or lower taxes" because that would certainly include VAT, and probably also Customs and Excise. I tabled my amendment in the hope of hearing the Committee's opinion on these various matters. We do not know very much about what is in the Government's mind in general with regard to the handling of tax. That is why we have all along been in difficulties. Until we know what is in the Government's mind, we do not know what question to be put to the electorate. We have at best to wait for the White Paper.

I have to ask a question arising out of an answer given by the noble Lord, Lord Haskel, to searching questions about the finance and tax provisions under Scottish devolution. He said:

"My Lords, if the Scottish parliament were to vary the tax rate downwards, Westminster would lose a possible £450 million of revenue but could adjust that from Scotland's block grant".--[Official Report, 18/6/97; col. 1236.]

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In other words, Scotland would be no better off for lowering taxation. I should like to know in particular how it would work with the raising of taxation. With the great Scottish tradition of education, and with the strong influence of the Liberal Democrats, they might well want to raise taxation specifically to pay for improved education.

Let us suppose that income tax were raised 3p. What effect would that have on the block grant? I hope that the Minister will enlighten us on that and deal with the point made by the noble Lord, Lord Haskel. He did not answer the question but he read his brief, which was very illuminating. It referred back to the effect of raising taxation by 3p in the pound. I hope that the Minister will tell us what is in the Government's mind. If he does, we shall be in a much better position to know what system ought to be adopted.

The subsequent amendments standing in my name are consequential on the two to which I have spoken. I beg to move.

6.30 p.m.

The Earl of Perth: My amendments are grouped with that moved by the noble and learned Lord, but I am not sure whether it is in order for me to speak to them as part of the whole story or separately. In any event, I shall work on the assumption that I should speak to my amendments now.

It is always an honour to follow the noble and learned Lord, Lord Simon. I agree that the words used in the schedule are too vague. It is of first importance that the questions, which appear in the schedule, are totally clear and unambiguous. The first part of the schedule is clear and states:

"I agree that there should be a Scottish parliament".

I have more difficulty with the second part. What is meant by:

"should have tax-varying powers"?

That is a confusing expression and I have tried in my amendments to make it clear what we are being asked to do in voting on that second part. That is why I propose the words "to raise or lower taxes", without in any way trying to suggest what should be part of the White Paper. Until we know what is in the White Paper we should not try to debate it. The form that I propose would make it easier for those for or against taxing to argue their case. The position would be much clearer to the voters, who must reach a decision. In Committee it is not appropriate to argue whether we have limited powers or whatever. That will come later after the publication of the White Paper. However, it is clear that we must get the question right.

I recently spoke with a number of my friends about the whole issue. They told me that I was right to support the first part of the schedule--whether or not we should have a Scottish parliament, although I must confess that I prefer the word "assembly"--but that the second part does not matter too much at this stage because we know that a Scottish parliament will not deal with taxation until later. There are so many other issues to be dealt with; namely, the exact relationship between the Scottish and English parliaments. As regards the issue

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of taxing, it is argued that the tax will be limited. That is like the argument, "Oh, but the baby is only a little baby". That answer is not good enough. If the second question is not correctly phrased at the start we might raise the whole issue of the Union. I said much about that in my speech on Second Reading and my position is well known. I believe that we must make the wording of the question as clear as possible.

I hope that the Government will accept my amendments in the spirit in which I move them. I am not against the proposals; I am trying to help. I am trying to clarify what is meant by them. I find the words "tax-varying powers" unclear. Indeed, they are fudging the issue, which is the last thing we should do when putting questions to the voters. I hope that my amendment, which tries to clarify the situation, is acceptable to the Government. If I am allowed to do so, I beg to move.

The Deputy Chairman of Committees: With respect to the noble Earl, he cannot move the amendment now. The Committee can deal only with one at a time.

Lord Campbell of Croy: We have heard amendments that have been tabled and addressed by two experienced Cross-Benchers in your Lordships' House. I refer to the noble and learned Lord, Lord Simon of Glaisdale, and the noble Earl, Lord Perth. The matter they have raised is relevant to our examination of the Bill today.

The noble Lord, Lord Taylor of Gryfe, intervened to make a comment with which I entirely agree; that we ought to be concentrating on the terms of the Bill and not dealing with general questions of devolution. However, a tax-varying power is something quite new and the electorate in Scotland should not be asked to vote on whether there should be such a power until the Government have made clear how they propose the power should or could be used and its effect. I hope that when he replies the Minister will be able to assure us on that point.

Last week the press in Scotland were reporting--we do not know whether it is correct or not--that the Chancellor of the Exchequer the right honourable gentleman Mr. Gordon Brown was already finding that the suggestion for a 3p variation in the basic rate of income tax was not practicable and was trying to get this changed in the scheme that is being prepared for a Scottish parliament. This is not surprising, but it is unsettling for the public in Scotland. It is very difficult to formulate proposals in this field: much more difficult than the Government have so far suggested. Have the Government already decided on a change following the Chancellor's consideration of this matter since he came into office and will the proposals on tax by then adopted be clearly set out and explained in the White Paper?

Many points have been raised, again in Scotland, by eminent bankers, accountants and others working in the financial field in Scotland who are asking how is it going to affect people who are working north or south of the Border or with bank accounts north or south of the Border. They will wish to know how it is going to

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affect dividend income and are the registrars of companies going to find out whether dividends are going to people north or south of the Border--will they be subtracting 3p or adding 3p? If so, it is going to be a huge business to do and also it might be unfair, because if it is decided that it is too difficult or complicated it would be the better-off people in Scotland who would probably benefit if dividends were not altered, whereas those people who have income from sources other than dividends would be worse off.

There are also other points which I will not go into here, but this demonstrates that the proposal for a tax varying power must be absolutely clear and decided and the public must be given a chance to understand everything, because they will look to these eminent financial leaders in Scotland for advice as to whether or not it is a good thing. At the moment they are indicating that they have not yet fathomed what it is that is being proposed. I support what the two noble Lords have suggested.

6.45 p.m.

Lord Mackie of Benshie: I should like to say that I am very pleased with the phrase "tax varying powers". I think the difficulties enunciated by the distinguished speakers before me can be sorted out in the White Paper. "Tax varying" is a much better phrase than the previous one used, which was "tax raising" because people did not understand what "raising" meant. They were not sure if "raising taxes" did not mean putting them up.

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