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Lord Ewing of Kirkford: My Lords, I rise to speak briefly and hope to avoid falling into the trap of making a Second Reading speech such as we have heard during our discussion of this amendment. I say at once that I agree with the noble Lord, Lord Mackay of Ardbrecknish, on the position of the Scottish Constitutional Convention. What the convention has talked about is income tax. I agree with the noble Lord on the position of Donald Dewar, the Secretary of State for Scotland, who has made it clear time and time again that what the Government are talking about is income tax. I agree with the position of the junior Minister in the Scottish Office, Henry McLeish, in his article in the Financial Times that what the Government are talking about is income tax.
Where I part company with the noble Lord, Lord Mackay, is that when I am told something I innocently believe it. I do not have the kind of suspicious mind that the noble Lord has. My position on this is quite clear: this is not a matter for the referendum, but for the primary legislation when it comes before both Houses of Parliament following the outcome of the referendum on the one hand and following the consultation on the White Paper on the other hand.
Let me pose this question to the noble Lord, Lord Mackay. My noble friend Lord Peston has already asked him three or four questions, but perhaps I may add one. Why pick out taxation to appear in a definitive form on the ballot paper at the referendum? Why not ask the people of Scotland, "Are you in favour of a Scottish parliament with 190 Members?" Why not ask the people of Scotland, "Are you in favour of a Scottish parliament elected by proportional representation?" Why not ask the people of Scotland, "Are you in favour of a Scottish parliament that does not follow slavishly the Westminster role model and where we can have pre-legislative committees?" Why pick out the one issue of taxation?
Before the noble Lord, Lord Mackay, answers those questions, I shall answer them for him because my answer will be much more accurate than his. The answer is that the scare stories were started running by Sir Bruce Pattullo, the governor of the Bank of Scotland. In this debate noble Lords opposite are deliberately attempting to set that scare running so that if they cannot frustrate a "Yes, yes" vote, they will seek to obtain a "Yes, no" vote. That is what this is all about and in his honest moments the noble Lord, Lord Mackay, will confess that that is the true position.
There is no valid reason why one issue only--in this case, taxation--should be selected for presentation to the people of Scotland in order, as is claimed from the other side of your Lordships' House, to make the question more definitive. This is clearly a matter for the principal legislation. It is not a matter for the referendum. If it were a matter for the referendum, this question should not stand alone. We should ask those
other questions about 190 Members, proportional representation and pre-legislative committees. There is no good reason for selecting this issue, except that it is a good frightener, and that is what it will be used for during the whole of the referendum campaign.4.30 p.m.
Lord Campbell of Croy: My Lords, I am pleased to be following the noble Lord, Lord Ewing, because I want to assist the noble Lord, Lord Peston. The noble Lord pointed out that the constitutional convention, of which he was co-chairman until he resigned on whether there should be a second proposition on taxation, recommended that it should be income tax only and that it could be varied up and down by 3p in the pound.
As far as I know, the Government confirmed that. What we have heard since is that the Government intend that the varying powers should affect income tax. If that is the case, it should be written into the Bill, as my noble friend Lord Mackay suggested. He will undoubtedly reply in full to the noble Lord, Lord Peston.
There is another point. I am not making a Second Reading speech, because I did so on Second Reading. I do not deal with Sir Bruce Pattullo's points about income tax, and the problem of dealing only with 3p on income tax where dividends and so on are concerned. We are not dealing with questions; they are propositions in the Bill, unlike previous referendums in this country. From all we understand, it was the Prime Minister, when he was Leader of the Opposition, who insisted that there should be a second proposition on tax varying powers in the referendum in Scotland.
Media rumours in Scotland now are that the Chancellor of the Exchequer will find that restricting, because he apparently has ideas about changing the income tax bands. If he does what one thinks that he has in mind, it would mean that the amount of money raised in Scotland--if the tax varying powers meant an increase--would be less than the sum that has been spoken about. There are problems, even if the matter is restricted to income tax.
The Earl of Balfour: My Lords, one of the most unpleasant taxes we have ever had was the selective employment tax which we had a few years ago. Whatever taxes are agreed, they should be specified. It should be made plain to the Scots people that the Parliament at Westminster will continue to have the final say.
Lord Monson: My Lords, the Government are right to resist the amendment. What is the point of Scotland having its own parliament unless it is to be given as many powers overall as, let us say, Delaware or Rhode Island. The voters of Delaware and Rhode Island can opt for a sales tax or a tax on alcohol or tobacco which is 2 per cent. to 3 per cent. higher or, possibly, lower than those prevailing in New Jersey and Massachusetts. I agree with the noble Lord, Lord Desai. Why should not the people of Scotland be given the same options if--it is a big if--they choose to vote for them?
Lord Dixon-Smith: My Lords, perhaps another Englishman might be rash enough to intervene in the
debate. I have just two points to make. The first, in answer to the noble Lord, Lord Ewing, is that I have always understood that the prime argument for devolution in Scotland--in principle I have no difficulty with that as a proposition--has always been that it will strengthen the unity of the UK. That then is something that we must consider.In all my public life, the one factor that has mattered and counted has been money. It was the Government's decision when in opposition to have that question on the ballot paper. It is the Government's decision and not anyone else's. It is relevant. This is not a Second Reading speech; it is very much a Committee stage speech, because I am trying to answer points that have been made. If the assurances that we have from people such as Mr. Dewar and others that this is an income tax matter-- I accept that it is a matter for the devolution Bill proper when we come to it--stand, that is fine. The difficulty is that the noble Lords, Lord Peston, Lord Desai and Lord Mackie, have raised an issue which is potentially divisive to the unity of the UK if one has a large number of varied tax rates across the whole spectrum.
It is one thing to quote experiences in the USA when one is dealing with one nation which has within it separate states with populations which are far larger than that of the whole of the UK, and distances that run in thousands of miles where we are accustomed to running in hundreds, but we are dealing with a small nation state. I have no difficulty with the proposition, if the proposition is income tax. If that is what it is going to be, I do not understand why there should be any difficulty in amending the question on the ballot paper. If that is what it is going to be, it would be simple to accept the point here and now and have it. It is noble Lords opposite who have raised the suspicions of ordinary people like me that it might mean something else.
Lord Rees: My Lords, it is true that we have had some speeches that have verged on Second Reading speeches this afternoon and during the two days in Committee. The reason for that is not difficult to find. It is because the Government have approached this important piece of constitutional legislation from the wrong end. We are going to ask the residents of Scotland and Wales to approve of something which has not been carefully sifted and thought out in the UK legislature.
I appreciate that there has been a Scottish convention. However, not being a resident of Scotland I confess that I have not followed its debates as closely as perhaps I should have done. We have not had the advantage of a convention in Wales, and so perhaps the matter has not been sifted out as carefully there as it may have been in Scotland. Whether or not it has been sifted out in Scotland, some important issues appear to have escaped the Government's attention, and have not been offered to us for debate.
It is said, "Leave it to the good sense of the Scots". That is an attractive proposition to someone who had a Scots mother even though he is resident in Wales and not in Scotland. Then I paused to think. Let us consider whether the question of taxation is of supreme importance. As a general proposition, of course it is because it is the basis of so much of our legislation and so many of our debates
in both Houses of Parliament. More than that, the Government have chosen to single out taxation as being a matter of supreme importance, to be approved or disapproved by the residents of Scotland, because, after all, it is in the schedule to the Bill.If one asks, "Why not leave this to the Scots to decide if and when they have their own parliament?" the answer is that the Government say that they want a view from the residents of Scotland. We are bound to think a little bit about these matters. Unfortunately, we cannot escape doing so now, because the noble Lord, Lord Sewel, has told us that we must press forward with this matter and that the view of the residents of Scotland must be taken in September before the main devolution legislation has even been printed. Indeed, I believe that supreme pressure has been brought to bear on the noble Lord, Lord Sewel, who until today has treated our interventions with courtesy and almost with reason. He has been a little offensive, if he will allow me to say so, but I realise that he has been under intense pressure, as have his colleagues in Cabinet. He is having to defend the indefensible, which, as I found in government, is sometimes a difficult operation.
Let us return to the issue before us. Yes, we want to know the questions which will be asked of the residents of Scotland. The questions relate to taxation and the scope of the powers which may be conferred on a Scottish parliament. After all, we know nothing about the Bill which will be introduced--that is, if a Bill is to be introduced, and we must not anticipate the outcome of the referendums--and we will not see the White Paper until later this week. We will want to know the degree to which the Government will pay attention to the no doubt cogent points which will be made during the debate on the White Paper before we rise for the Summer Recess. Of course we must focus on that particular question.
The noble Lord, Lord Ewing, said that he was a trusting person. That is an admirable characteristic and we must all try to take at face value even our opponents across the Chamber. However, if all that is to be proposed in the White Paper and in any subsequent legislation relates to varying the powers to raise or to lower income tax, why not accept this simple amendment? On the other hand, the Government may wish to reserve their position to see exactly how things are taken north of the Border, or to see the problems which will no doubt be turned up by the Inland Revenue. My heart bleeds for the Chancellor of the Exchequer--it does not often do so--who must try to reconcile the propositions with the general framework of direct taxation in this country. Having once had the privilege of receiving advice while appearing in the other place on matters of taxation, I appreciate the kind of detail and well-thought-out advice which are no doubt being tendered to Treasury Ministers by the Inland Revenue.
If the matter is as simple as noble Lords opposite would have us believe and there is nothing more than marginal adjustments to income tax--although, as has emerged in the debate, the technical difficulties of that will be considerable--they should accept the amendment. If the matter is not so simple, we are right in ventilating the points today. We shall expect to consider the matter closely when we read the White Paper. We shall have to
return to it on the Second Reading of the proposed legislation, and we must go back to substantive legislation if a proper devolution Bill is introduced.Finally, this is not a matter only for our friends north of the Border. As was pointed out by my noble friend Lord Boardman and others, if we go a little further, and even if there are major adjustments to income tax north of the Border, that may have a considerable effect on residents south of the Border and in Wales. We operate in one economic entity. Our taxation system, which has been developed over a century but not always to our satisfaction, is highly complex. Once we start raking about into that structure there will be many side effects and I doubt whether the noble Lord, Lord Sewel, and his colleagues have yet bothered to think them through.
4.45 p.m.
Lord Sewel: My Lords, the amendment is intended to clarify the nature of the tax-varying powers of a Scottish parliament, upon which the Scottish electorate will be invited to vote at a referendum. Its purpose is to change the references to tax-varying powers so that it refers specifically to income tax. In my contribution, I shall set myself two tasks. The first is to try to deal with as many of the points--some well made--as possible. The second is slightly more difficult; it is to remove the suspicions which lurk in the deeply suspicious mind of the noble Lord, Lord Mackay of Ardbrecknish. I do not wish to speculate upon whether that cast of mind is the product of his being a Minister for so long in the previous administration.
As regards my first task, I ask noble Lords to listen to what I say because the noble Lord, Lord Renton, and others raised the spectre of a whole series of taxes being introduced, raised or changed; for instance, excise duty and sales tax. I ask your Lordships to reflect on the fact that what has been said throughout the discussion in Scotland, the debate in the other place and the debate in this House has centred specifically and solely on income tax--
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