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Lord Peston: My Lords, I believe that the noble Lord, Lord Mackay of Ardbrecknish, will get the chance to speak a second time and therefore I address him in the hope that he can clarify his position. First, can the noble Lord tell me whether his party's position is still that it opposes devolution? Secondly, if there is devolution, is it his party's view that the Scottish parliament should not have any tax-raising powers?

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And, thirdly, if there is to be devolution and there are to be tax-raising powers, does his party believe that those powers should be limited to income tax? In other words, the noble Lord has three positions, one following from the other. That is the only way in which I can make sense of the Opposition's position.

I remember raising this matter when we were in Opposition and the question of the tartan tax arose. If the Scots are to have their own parliament, is it not rational that they should be able to make up their minds about what to do when they have that devolved parliament? It seems to me not only logical, but a matter of Scots' pride, that if devolution goes ahead, the Scots themselves make up their own minds. That is why I am slightly lost by the noble Lord's position.

The noble Lord may well be right that if there is to be a tax the correct one for the Scottish parliament to impose is income tax. But that is not to be decided at the referendum. I apologise to the noble Lord, Lord Stanley, because I assume that we are discussing Wales as well, which I always forget when these issues arise. I am given to understand that the Welsh will not have tax raising powers, so we are not discussing Wales. If I were a Welshman I would probably want to have tax raising powers as well. I would be very proud if I were a Welshman. However, that is all irrelevant. Noble Lords opposite are well aware that I have no influence on any of these matters. Surely the central issue is: why not let the Scots trust themselves to do what they want? In that sense, surely this amendment is irrelevant.

4.15 p.m.

Lord Mackie of Benshie: My Lords, the position taken by the noble Lord, Lord Mackay, is entirely logical because he does not believe that the Scottish people have any judgment whatever. They threw out every Tory MP and therefore they must be wrong.

Baroness Carnegy of Lour: My Lords, it is not a question of what people on this side of the House think should be the tax-raising power for the Scottish parliament; it is about what the Government have confirmed over and over again as their intention, which is that tax-raising or tax-lowering should be on income tax. The Government have said that and they have ruled out everything else. I say that to the noble Lords, Lord Peston and Lord Desai. The noble Lord, Lord Desai, made the case for me as far as I am concerned because my suspicion is that the Government do not want the people of Scotland to vote for tax-raising powers. They want to scare them into thinking that the tax-raising power could be not only income tax but might be additionally VAT or a sales tax. There is a whole range of things which could be affected. People are extremely alarmed at that prospect.

The Scottish people need to know what precisely the tax raising power is to be. They will only understand it properly if it is on the ballot paper. That is a very serious point. Not everyone will study the summary of the White Paper that will be circulated; very few will study

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the White Paper itself. People want to know how the parliament is going to affect them before they vote in a consultative referendum.

The Minister said in Committee that we should concentrate on two simple principles; namely, whether a Scottish parliament is wanted and whether it should have tax-raising powers. It is only reasonable that people should know the form that that tax-raising power will take--income tax or all the other things. Noble Lords opposite who do not live in Scotland understandably have not followed everything the Government have said up to date. There is a wide range of options whereby the Scottish people can pay for their parliament. To make the matter simple, it should be put on the ballot paper. That is not a difficult thing for the Government to do unless they want people to vote against tax-raising powers.

The Earl of Perth: My Lords, I was very glad to add my name in support of the amendment of the noble Lord, Lord Mackay. I recall at Committee stage many of us tried to clarify what was meant by tax-varying powers. We were not very successful. But when one reads the report of those discussions, the noble Lord, Lord Sewel, very helpfully indicated that if the tax-raising powers were three pence in the pound on income tax, that would yield £450 million. Incidentally, £450 million is a very large amount of money per head of population. It is £100 for each man, woman and child. The Scottish people should be made aware of that.

It may be that the White Paper will reveal all and that in a sense the amendment is unnecessary. We may find that the White Paper gives the clues we want. If that is not the case then I believe that the Scottish voters have the right to know just what is intended. It is all very well to say, "You must trust them in due time." They should know now what is meant.

That brings me to my second point. We need to clarify what all this is about, particularly when it comes to the tax-varying powers. Will the people realise that that may seriously endanger the economy in the sense that new businesses may well look to locate elsewhere. They may say, "If Scotland has tax-varying powers, we shall not know where we stand, so let's look elsewhere. Let's go to Wales or to England; we must be careful about coming to Scotland because we do not know its form of taxation". It would be helpful if those who want the Scottish parliament to have tax-varying powers could explain whether they are limiting those powers to income tax or whether they will affect VAT or any other tax.

I plead for postponement on this question. I know that in a sense I am making a Second Reading speech, but this is an absolutely vital matter for both Houses, for the Union and for its three constituent parts. So, if we hammer away once or twice--or perhaps three times--and repeat ourselves, I hope that noble Lords will forgive me and others for that. This issue is so important. Indeed, I cannot think of any other issue that is likely to come before us in the next Parliament which begins to compare with the possibility of the break-up of the Union by our getting this wrong as opposed to our getting it right.

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I come now to why I plead for postponement. We do not know how the relationship between Westminster and the Scottish parliament will come out. We know that the Scottish parliament will have an opportunity to divide the block grant, which may be as much £15 billion. That is a huge responsibility with which suddenly to be confronted. It will take a long time to work it out in practice. But that is not all. In the early stages, all of the issues of which your Lordships are well aware, such as the West Lothian question and that of the exact relationship between the two parliaments, will come to the fore. Really and truly, the Scottish parliament will be fully occupied in its first session. Therefore, I plead that we agree that there should be a "No" vote on the second question on the basis that it is open to the Scottish parliament and to Westminster, if they find that there is a need for a taxing power, to introduce it in, say, the second or third Scottish parliament. What's the hurry?

My family motto happens to be "Gang warily". Noble Lords may say that that is rather a pawky motto, but I believe that in this case postponement is what is called for. Let us wait on this vital issue because if the provisions are accepted as they stand, it will be the beginning of the break-up of the Union--of that there can be no doubt--because as we all know, the power of the purse is what counts. If we ask the people of Scotland this second question and if we get the answer "Yes", which I deeply hope that we shall not, I can see many quarrels lying ahead of us. Indeed, the English may for a time--perhaps for the first time--say, "What's all this about? We have been very successful together. Over the past 300 years we have built up an empire such as has never been seen before in the history of the world and the Scots made a huge contribution to that". Are we to put all that in danger?

As it stands, the amendment to a degree limits and makes the position more easily understood by the people of Scotland. I do not want to say that the question will be more palatable to those who might say "Yes". I hope that they will not, but I believe that our amendment is just what is needed from all angles. Even so, I plead that we do not have any tax-varying powers in the first parliament, but that we look at the question again in the future.

Lord Boardman: My Lords, the tax-varying powers which have been put forward by the Government have always been presented, as my noble friend said when moving the amendment, as relating to income tax. The burden of that--or it might be the benefit--falls primarily on the people of Scotland. Much as we may like or dislike it, it is not of major concern to us as much as might be the case if there were a variation of other taxes. If we assume that other taxes can be varied under the Bill, let us consider what might happen if the Scottish parliament were able to reduce excise duty. Lorries would troop over the Scottish border in massive numbers, as happens on boats to France. Other taxes could also be varied. The impact on other parts of the

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United Kingdom could be severe. It is important that the power should be confined to income tax, as my noble friend suggested.

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