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Lord Sewel: Perhaps I may start by issuing a warning and then seeking the indulgence of the Committee. The matters covered in this group of amendments are somewhat similar to those that we shall address in the next group, so there is a danger that I shall repeat myself. I shall try to reduce the repetition to the minimum and it may be helpful if I try to deal straightaway with some of the questions raised.

I say to the noble Lord, Lord Rees, that the Bill's purpose is simple: to establish whether or not the people in Scotland and Wales will have a vote on the detailed proposals to be put before them by the Government through a White Paper. That is the only subject of the Bill. It is not about spelling out in great detail, or in any detail at all, the nature of the scheme. The scheme will be described and made clear in the White Paper which will be before the electorate in Scotland and Wales prior to the referendum.

Lord Simon of Glaisdale: The noble Lord has put the question to be posed as being: "Do you agree with the proposals in the White Paper?" But the words in the statute that are put to the electorate are: "Do you want tax-varying powers?" The Minister must face the fact that that is what is in the Bill. Is he saying that there

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should be unlimited tax-varying powers in a Scottish parliament, powers to vary not only income tax, but VAT, Customs, Excise and so on? Does he mean that?

Lord Sewel: No. Let me make it quite clear that what will be discussed are the particular and precise proposals in the White Paper, which will be detailed and limited. They will form the basis of the decision that the people will make in a referendum. The detailed proposals in the White Paper will then form the basis of the Bill establishing the Scottish parliament, which will indicate clearly and explicitly what those tax-raising powers are. To be more helpful, let me go on. Mention was made of varying the opportunity to create new taxes. The definition of varying with which I am working--and so is everyone else--is the power to vary existing taxes, not to bring in new taxes or establish new taxes.

I go further. In everything that we have ever said on taxation in relation to the powers of the Scottish parliament, we have made clear that it relates to income tax. Great mischief-making is going on in some areas by running scare stories that it is something to do with a sales tax or other forms of taxation. The Government have made clear, throughout the whole process, right from the constitutional convention days onwards, that any tax-varying powers would relate purely and solely to the raising and lowering of income tax.

I wish to deal with a point made by the noble and learned Lord, Lord Simon, and, as expected, by the noble Lord, Lord Mackay of Ardbrecknish. It concerned the business of what would happen if the Scottish parliament increased or decreased income tax by 3p in the pound. Let us go over that. The noble Lord, Lord Mackay, is right and I do not see why there is any great mystery about it. It is not something that has been pulled out of a hat nor has it jumped out of a box. Clearly, if you reduce taxation, you have to pay for it. It is as simple as that. Reductions in expenditure must be made. We are not dealing with magic mirrors or something similar. It is a simple proposition.

Let us go over it. If the parliament decided to increase tax, the Inland Revenue would collect the extra tax, which would be paid over to the Scottish parliament by the UK Government. If the parliament decreased tax, then the Inland Revenue's overall tax take would be reduced. To reflect that, the overall level of resources passed to the Scottish parliament by way of block grant would be reduced accordingly. That is, if the Scottish parliament should decide to exercise that power. However, I must also stress that there is a world of difference between having a power and exercising that power through a policy. So let us not have another raft of scare stories that Scottish expenditure will be reduced because there will be a wish to reduce the level of taxation in Scotland.

The first question asked by the noble Lord, Lord Mackay, is whether we are dropping the whole income tax power too. The answer is, no, we are not. Wait for the White Paper to see the details. I have answered the second question. The third question was on the running of the parliament. The amount of resource available to the parliament will go there on the tried and tested basis of the block and formula approach and funding of the

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parliament will have to come from the resources available to it. It is as simple as that. Again, we are not dealing with fancy figures or magic numbers. That is the reality. We have never tried to avoid it.

I turn to more general points. We believe that it is fundamentally important that people in Scotland should be given the opportunity to express their views specifically on the tax-varying proposals. To establish a parliament is an important step. To give the parliament tax-varying powers goes such a significant step further that the Government believe that it is quite right and proper that there should be a separate decision by the people of Scotland on that power.

Lord Simon of Glaisdale: Can the noble Lord say at what period that revelation came to the Government?

Lord Sewel: It is not so much that the revelation came to the Government. I am trying to bring the revelation to the rest of your Lordships' House. It has been argued that the amendments are intended to clarify the nature of the tax-varying powers of the Scottish parliament on which the Scottish electorate will be invited to vote in the referendum. Their purpose is to change the references to tax-varying powers to refer specifically to income tax and to change references to tax-varying powers to refer instead to powers to raise or lower taxes, if we put the bundle of amendments together.

Members of the Committee have argued that the limited nature of the tax-varying powers which we propose for a Scottish parliament should be reflected in the Bill and in particular there should be no suggestion that the Scottish parliament should be able to change the nature of the tax which it might collect. I hope that at long last I have been able to give an assurance on that--not for the first time--and one which will kill off that mischievous line of argument that we have heard. I understand and appreciate the intention behind the amendments, but I do not believe that they will be helpful additions to the Bill, because they misunderstand the process whereby our proposals for tax-varying powers will be enacted.

The proposition put to the people in Scotland in the referendum is one of principle. The referendum is about issues of principle and not issues of detail. Issues of detail are properly dealt with in the White Paper that forms the basis for the campaign and for the decision at the time when the people come to vote in the referendum. If one starts moving away from principle to detail in the referendum legislation itself, one cannot end the process. It goes on and on. One starts spelling out, as was indicated, the precise nature--dotting i's and crossing t's--of the tax-varying powers. One starts spelling out the details of the general powers which will be transferred. That is not the way to tackle the problem.

The way to tackle the problem and the issue is to make sure that the referendum concentrates on the two principal issues: the establishment of a Scottish parliament and its ability to have tax-varying powers; and giving flesh to those principles and details to those

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principles through the White Paper which will form the basis of debate and controversy, quite understandably, in Scotland.

7.30 p.m.

Lord Renton: Perhaps the noble Lord will allow me to interrupt him. He must appreciate that a White Paper is not part of the law and that, if there is a "yes" vote enabling the Government to introduce a Bill to lay down the details of a Scottish parliament and the taxing powers, Parliament may not approve all the details of the White Paper when translated into the Bill. Amendments may be made. It may become clear that some of the provisions of the White Paper are simply not workable. So the people will be in a very difficult position and so will the Government.

Lord Sewel: The basis of the referendum is to put to the electorate in Scotland the Government's proposals and to deal with the claim that has been made sometimes in this Chamber and certainly in the other place that there is not a degree of support for the Government's proposals in Scotland and in Wales. That is why the referendum is there: to nail what I would call the misrepresentation that there is not popular support in Scotland and Wales for these proposals. So, it is a means of establishing the degree of popular support in those two countries for the proposals.

Clearly, once we have the White Paper and once there is a referendum, we shall seek to legislate through the Bill to give life to the proposals in that White Paper. So, through all the process, once we get to the stage of this particular Bill having been passed--or, before this Bill is passed--we shall have a White Paper. That will contain the details, as I have said many times. I have only said it so many times because it is a point that I seem to be incapable of getting across to some Members of this Chamber. The White Paper will give the detail. The electorate will vote on the basis of that detail. That is it.

Lord Strathcona and Mount Royal: Perhaps I may interrupt the noble Lord once again. If he wants, as earlier he said he did, to clarify the Government's intentions, can he tell us how he would wish us to react to Amendment No. 8A by the noble and learned Lord, Lord Simon of Glaisdale? That amendment appears to say exactly what he is telling the Committee.

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